The links between some European financial factors and the BRICS credit default swap spreads
Ano Sujithan, Kuhanathan; Avouyi-Dovi, Sanvi (2013), The links between some European financial factors and the BRICS credit default swap spreads, 62nd annual meeting of the AFSE, 2013-06, Marseille, France
TypeCommunication / Conférence
Conference title62nd annual meeting of the AFSE
MetadataShow full item record
Author(s)Ano Sujithan, Kuhanathan
Banque de France
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.
Subjects / KeywordsCredit default swap; BRICS; emerging markets; euro area financial markets indicators; Markov switching
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