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Sovereign Risk and Armed Conflict: An Event-study for Colombia


  • Andrés Castañeda

    () (Universidad del Rosario)

  • Juan F. Vargas

    () (Universidad del Rosario)


We study the relationship between some of the most important recent events of the Colombian armed conflict and the foreign perception of sovereign risk, as measured by the Credit Default Swap (CDS) of the Colombian bonds. Using a recent methodology we estimate the causal effect of conflict events widely publicized by the international media on the price of the CDS. We construct a Synthetic Control Group to use as the non-conflict counterfactual of the Colombian CDS and compare its behavior around relevant conflict-event days with that of the actual (conflict-affected) Colombian CDS. Results suggest that the impact of conflict on the foreign perception of sovereign risk is rather idiosyncratic, and depends on the political context surrounding each event.

Suggested Citation

  • Andrés Castañeda & Juan F. Vargas, 2011. "Sovereign Risk and Armed Conflict: An Event-study for Colombia," HiCN Working Papers 92, Households in Conflict Network.
  • Handle: RePEc:hic:wpaper:92

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    References listed on IDEAS

    1. D. de Walque & P. Verwimp, 2010. "The Demographic and Socio-economic Distribution of Excess Mortality during the 1994 Genocide in Rwanda," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 19(2), pages 141-162, March.
    2. de Walque, Damien, 2004. "The long-term legacy of the Khmer Rouge period in Cambodia," Policy Research Working Paper Series 3446, The World Bank.
    3. Tilman Bruck & Kati Schindler, 2009. "The Impact of Violent Conflicts on Households: What Do We Know and What Should We Know about War Widows?," Oxford Development Studies, Taylor & Francis Journals, vol. 37(3), pages 289-309.
    4. Andre, Catherine & Platteau, Jean-Philippe, 1998. "Land relations under unbearable stress: Rwanda caught in the Malthusian trap," Journal of Economic Behavior & Organization, Elsevier, vol. 34(1), pages 1-47, January.
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    Cited by:

    1. Fırat Bilgel & Burhan Can Karahasan, 2016. "Thirty Years of Conflict and Economic Growth in Turkey: A Synthetic Control Approach," LEQS – LSE 'Europe in Question' Discussion Paper Series 112, European Institute, LSE.
    2. Alvaro J. Riascos & Juan F. Vargas, 2011. "Violence and growth in Colombia: A review of the quantitative literature," Economics of Peace and Security Journal, EPS Publishing, vol. 6(2), pages 15-20, July.
    3. Dennis Essers & Stefaan Ide, 2017. "The IMF and precautionary lending : An empirical evaluation of the selectivity and effectiveness of the flexible credit line," Working Paper Research 323, National Bank of Belgium.
    4. Dennis Essers & Stefaan Ide, 2017. "The IMF and precautionary lending : An empirical evaluation of the selectivity and effectiveness of the flexible credit line," Working Paper Research 323, National Bank of Belgium.

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