Do sovereign ratings cause instability in cross-border emerging CDS markets?

We analyse the cross-border transmission effect of credit ratings on sovereign CDSs covering a broad sample of emerging countries during the period 2004 to 2015. This study differentiates between the spillover and competition effects between and within geographical areas of emerging countries. We fi...

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Detalles Bibliográficos
Autores: Ballester Miquel, Laura, González Urteaga, Ana
Tipo de recurso: artículo
Estado:Versión aceptada para publicación
Fecha de publicación:2021
País:España
Institución:Universidad Pública de Navarra
Repositorio:Academica-e. Repositorio Institucional de la Universidad Pública de Navarra
OAI Identifier:oai:academica-e.unavarra.es:2454/39409
Acceso en línea:https://hdl.handle.net/2454/39409
Access Level:acceso abierto
Palabra clave:Sovereign credit risk
Credit ratings
CDS spreads
Emerging markets
Spillover effects
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spelling Do sovereign ratings cause instability in cross-border emerging CDS markets?Ballester Miquel, LauraGonzález Urteaga, AnaSovereign credit riskCredit ratingsCDS spreadsEmerging marketsSpillover effectsWe analyse the cross-border transmission effect of credit ratings on sovereign CDSs covering a broad sample of emerging countries during the period 2004 to 2015. This study differentiates between the spillover and competition effects between and within geographical areas of emerging countries. We find substantial evidence of cross-border effects with asymmetric responses to upgrades and downgrades. The market reaction differs across regions, reflecting how the international and local impact of rating events are due to different types of effects. At the international portfolio level, the competitive effect is dominant over the spillover effect. Negative events in Asia benefit Africa (which is also negatively affected by upgrades in Asia) and Middle East, the latter transmitting in turn to Asia with the same competitive effect. However, some spillover effects are also found both at the portfolio and intra-portfolio levels. The ones associated with downgrades are especially sensitive. In these cases, we identify the particular emerging economies that contribute to an increase in financial instability and to regional spillover effects.The authors acknowledge financial support from the Fundación Ramón Areces and from the Spanish Ministry of Science, Innovation and Universities and FEDER project PGC2018-095072-B-I00. In addition, Ana González-Urteaga acknowledges financial support from the Ministry of Economics and Competitiveness through grant ECO2016-77631-R (AEI/FEDER.UE).ElsevierInstitute for Advanced Research in Business and Economics - INARBE2021info:eu-repo/semantics/articleinfo:eu-repo/semantics/acceptedVersionapplication/pdfhttps://hdl.handle.net/2454/39409reponame:Academica-e. Repositorio Institucional de la Universidad Pública de Navarrainstname:Universidad Pública de NavarraInglésinfo:eu-repo/grantAgreement/ES/1PE/ECO2016-77631-R© 2020 Elsevier Inc. This manuscript version is made available under the CC-BY-NC-ND 4.0https://creativecommons.org/licenses/by-nc-nd/4.0/info:eu-repo/semantics/openAccessoai:academica-e.unavarra.es:2454/394092026-06-17T12:41:47Z
dc.title.none.fl_str_mv Do sovereign ratings cause instability in cross-border emerging CDS markets?
title Do sovereign ratings cause instability in cross-border emerging CDS markets?
spellingShingle Do sovereign ratings cause instability in cross-border emerging CDS markets?
Ballester Miquel, Laura
Sovereign credit risk
Credit ratings
CDS spreads
Emerging markets
Spillover effects
title_short Do sovereign ratings cause instability in cross-border emerging CDS markets?
title_full Do sovereign ratings cause instability in cross-border emerging CDS markets?
title_fullStr Do sovereign ratings cause instability in cross-border emerging CDS markets?
title_full_unstemmed Do sovereign ratings cause instability in cross-border emerging CDS markets?
title_sort Do sovereign ratings cause instability in cross-border emerging CDS markets?
dc.creator.none.fl_str_mv Ballester Miquel, Laura
González Urteaga, Ana
author Ballester Miquel, Laura
author_facet Ballester Miquel, Laura
González Urteaga, Ana
author_role author
author2 González Urteaga, Ana
author2_role author
dc.contributor.none.fl_str_mv Institute for Advanced Research in Business and Economics - INARBE
dc.subject.none.fl_str_mv Sovereign credit risk
Credit ratings
CDS spreads
Emerging markets
Spillover effects
topic Sovereign credit risk
Credit ratings
CDS spreads
Emerging markets
Spillover effects
description We analyse the cross-border transmission effect of credit ratings on sovereign CDSs covering a broad sample of emerging countries during the period 2004 to 2015. This study differentiates between the spillover and competition effects between and within geographical areas of emerging countries. We find substantial evidence of cross-border effects with asymmetric responses to upgrades and downgrades. The market reaction differs across regions, reflecting how the international and local impact of rating events are due to different types of effects. At the international portfolio level, the competitive effect is dominant over the spillover effect. Negative events in Asia benefit Africa (which is also negatively affected by upgrades in Asia) and Middle East, the latter transmitting in turn to Asia with the same competitive effect. However, some spillover effects are also found both at the portfolio and intra-portfolio levels. The ones associated with downgrades are especially sensitive. In these cases, we identify the particular emerging economies that contribute to an increase in financial instability and to regional spillover effects.
publishDate 2021
dc.date.none.fl_str_mv 2021
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/acceptedVersion
format article
status_str acceptedVersion
dc.identifier.none.fl_str_mv https://hdl.handle.net/2454/39409
url https://hdl.handle.net/2454/39409
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.relation.none.fl_str_mv info:eu-repo/grantAgreement/ES/1PE/ECO2016-77631-R
dc.rights.none.fl_str_mv © 2020 Elsevier Inc. This manuscript version is made available under the CC-BY-NC-ND 4.0
https://creativecommons.org/licenses/by-nc-nd/4.0/
info:eu-repo/semantics/openAccess
rights_invalid_str_mv © 2020 Elsevier Inc. This manuscript version is made available under the CC-BY-NC-ND 4.0
https://creativecommons.org/licenses/by-nc-nd/4.0/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Elsevier
publisher.none.fl_str_mv Elsevier
dc.source.none.fl_str_mv reponame:Academica-e. Repositorio Institucional de la Universidad Pública de Navarra
instname:Universidad Pública de Navarra
instname_str Universidad Pública de Navarra
reponame_str Academica-e. Repositorio Institucional de la Universidad Pública de Navarra
collection Academica-e. Repositorio Institucional de la Universidad Pública de Navarra
repository.name.fl_str_mv
repository.mail.fl_str_mv
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