Volatility Spillover Networks of Credit Risk: Evidence from ASW and CDS Spreads in Turkey and Brazil
Küçük Resim Yok
Tarih
2024
Yazarlar
Dergi Başlığı
Dergi ISSN
Cilt Başlığı
Yayıncı
Savez Ekonomista Vojvodine
Erişim Hakkı
info:eu-repo/semantics/openAccess
Özet
This study examines received and transmitted volatility spillovers of Credit Default Swap (CDS) and Asset-Swap Spread (ASW) for Brazil and Turkey. The empirical analysis is implemented using two country-based (stock markets and exchange rates) and two global (volatility index and global economic activity index) variables to account for the impact of integration into global markets. Empirical results suggest that both countries display distinctive features in their spillover networks. While exchange rates and the stock market figure prominently in Brazil as a source of spillovers, for Turkey, the primary element in spillovers appears to be credit risk indicators. Time-varying analysis results show that the European Debt Crisis of 2010-2011 and the global liquidity crunch of 2018-2019 are two critical periods in volatility spillovers that occurred toward credit risk indicators. Brazil displays more sensitivity to the developments of the pandemic than Turkey, likely due to its dependence on global economic activity and energy prices. Finally, for both countries, the leading variable in spillovers to credit risk indicators during financial turbulence episodes appears to be foreign exchange markets. This result highlights both economies' fragility and vulnerability to foreign exchange market-based shocks. Thus, we suggest effective and solid measures in this regard. Otherwise, those shocks could potentially induce a higher cost of financing in both economies due to the negative impacts on CDS and ASW spreads.
Açıklama
Anahtar Kelimeler
Volatility spillovers, Stock returns, Credit risk, COVID-19, Country studies
Kaynak
Panoeconomicus
WoS Q Değeri
N/A
Scopus Q Değeri
Q2
Cilt
71
Sayı
4
