Date
2013
Dewey
Economie financière
Sujet
Credit default swap; BRICS; emerging markets; euro area financial markets indicators; Markov switching
JEL code
C.C1.C13; G.G1.G12; G.G1.G15
Conference name
62nd annual meeting of the AFSE
Conference date
06-2013
Conference city
Marseille
Conference country
France
Author
Ano Sujithan, Kuhanathan
status unknown
Avouyi-Dovi, Sanvi
status unknown
Type
Communication / Conférence
Item number of pages
38
Abstract (EN)
Emerging economies and especially the BRICS countries have strong economic ties with the euro area. In addition, the financial crisis in the euro area may have effects on other markets or areas, especially those of the main emerging markets. Credit default swap (CDS) spreads are relevant indicators of credit risks. After identifying a set of fundamental determinants for sovereign CDS spreads, including euro area financial factors and computing Markov switching unit root test, we estimate Markov switching models over the period from January 2002 to August 2012, in order to examine the behaviour of sovereign CDS spreads in the BRICS countries. , i) We detect two different regimes for the BRICS, that finding is backed by conventional robustness checks and economic events; ii) most of the explanatory variables are involved in the determining theses regimes. Thus both financial and real factors have an impact on the relations defining each regime, except for Russia which is only impacted by financial ones. Especially, euro area financial indicators are largely involved in the BRICS sovereign CDS spreads’ dynamics. Besides, the robustness check supports the use of euro area variables as determinants of BRICS sovereign CDS spreads.