Article ID Journal Published Year Pages File Type
7368145 Journal of Monetary Economics 2018 24 Pages PDF
Abstract
The shape of the term structure of credit default swap spreads is an informative signal about the importance of global and domestic risk factors to the time variation of sovereign credit spreads. Exploiting cross-country heterogeneity among 44 countries, I document that the importance of global and country-specific risk in explaining sovereign credit risk varies with the sign of the slope of the term structure and the duration of its inversion. A model is used to show that global uncertainty shocks determine spread changes when the slope is positive, and that domestic shocks are more important when the slope is negative.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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