The Impact of Oil Shocks on Sovereign Default Risk
The paper examines the impact of oil shocks on sovereign credit default swaps (CDS) for the G10 countries and major oil-exporting countries. The results show that oil demand shocks have a uniformly negative impact on CDS spreads. In contrast, oil supply shocks increase the spreads of the G10 countries, but reduce the spreads of oil-exporting countries. Using quantile regressions, the findings show that oil demand shocks affect spreads across the conditional distribution, while oil supply shocks mostly influence the upper quantiles of spread changes. Furthermore, a two-state Markov-switching modeling confirms a significant non-linearity in the impact of oil shocks.
Main Authors: | , |
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Format: | Working Paper biblioteca |
Language: | English |
Published: |
World Bank, Washington, DC
2021-02
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Subjects: | OIL PRICES, OIL SHOCK, DEBT, SOVEREIGN DEBT, SOVEREIGN CREDIT DEFAULT SWAPS, OIL EXPORTERS, G10, OIL-EXPORTING COUNTRY, |
Online Access: | http://documents.worldbank.org/curated/en/289701613502786051/The-Impact-of-Oil-Shocks-on-Sovereign-Default-Risk https://hdl.handle.net/10986/35142 |
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