Premium
The Drivers of Sovereign CDS Spread Changes: Local Versus Global Factors
Author(s) -
Hibbert Ann Marie,
Pavlova Ivelina
Publication year - 2017
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12140
Subject(s) - quantile , credit default swap , sovereign credit , quantile regression , panel data , econometrics , economics , sovereignty , distribution (mathematics) , credit risk , monetary economics , mathematics , actuarial science , politics , political science , law , mathematical analysis
We use daily data for a panel of 34 countries to investigate regional differences in sovereign credit default swaps (CDS) spread determinants and the significance of local versus global market factors. Similar to prior studies, we find a high level of commonality among CDS spreads, but our results show that this effect is stronger in Latin American CDS. The results of our quantile panel regression model show that although global forces drive spreads across the conditional distribution, changes in credit ratings are significant in explaining CDS spreads only in the upper quantiles. We also confirm the existence of regional differences in spread determinants.