Geopolitical tensions and sovereign credit risks

Sercan Demiralay; Said Kaawach; Erhan Kilincarslan; Artur Semeyutin

doi:10.1016/j.econlet.2024.111609

Geopolitical tensions and sovereign credit risks

Sercan Demiralay, Said Kaawach, Erhan Kilincarslan, Artur Semeyutin

Research output: Contribution to journal › Article › peer-review

17 Citations (Scopus)

Abstract

This paper investigates the impact of country-specific geopolitical risks (CS_GPR) on credit default swaps (CDS). Using a dataset from 39 countries globally from 2006 to 2022, we find that idiosyncratic geopolitical shocks heighten the sovereign risk of the home country, causing significant increases in CDS spreads. The impact of CS_GPR on CDS becomes more pronounced during the periods of higher geopolitical tension, perceived sovereign credits risks, market volatility, and poorer economic and market performance.

Original language	English
Article number	111609
Number of pages	5
Journal	Economics Letters
Volume	236
Early online date	26 Feb 2024
DOIs	https://doi.org/10.1016/j.econlet.2024.111609
Publication status	Published - 1 Mar 2024

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Geopolitical tensions and sovereign credit risksAccepted author manuscript, 328 KBLicence: CC BY-NC-ND

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abstract = "This paper investigates the impact of country-specific geopolitical risks (CS\_GPR) on credit default swaps (CDS). Using a dataset from 39 countries globally from 2006 to 2022, we find that idiosyncratic geopolitical shocks heighten the sovereign risk of the home country, causing significant increases in CDS spreads. The impact of CS\_GPR on CDS becomes more pronounced during the periods of higher geopolitical tension, perceived sovereign credits risks, market volatility, and poorer economic and market performance.",

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AU - Demiralay, Sercan

AU - Kaawach, Said

AU - Kilincarslan, Erhan

AU - Semeyutin, Artur

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N2 - This paper investigates the impact of country-specific geopolitical risks (CS_GPR) on credit default swaps (CDS). Using a dataset from 39 countries globally from 2006 to 2022, we find that idiosyncratic geopolitical shocks heighten the sovereign risk of the home country, causing significant increases in CDS spreads. The impact of CS_GPR on CDS becomes more pronounced during the periods of higher geopolitical tension, perceived sovereign credits risks, market volatility, and poorer economic and market performance.

AB - This paper investigates the impact of country-specific geopolitical risks (CS_GPR) on credit default swaps (CDS). Using a dataset from 39 countries globally from 2006 to 2022, we find that idiosyncratic geopolitical shocks heighten the sovereign risk of the home country, causing significant increases in CDS spreads. The impact of CS_GPR on CDS becomes more pronounced during the periods of higher geopolitical tension, perceived sovereign credits risks, market volatility, and poorer economic and market performance.

KW - Geopolitical risk

KW - Credit default swaps

KW - Sovereign credit risk

KW - Market volatility

UR - https://www.scopus.com/pages/publications/85186463454

U2 - 10.1016/j.econlet.2024.111609

DO - 10.1016/j.econlet.2024.111609

M3 - Article

SN - 0165-1765

VL - 236

JO - Economics Letters

JF - Economics Letters

M1 - 111609

ER -

Geopolitical tensions and sovereign credit risks

Abstract

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