International Journal of Empirical Research Methods

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The International Journal of Empirical Research Methods is dedicated to promoting and advancing empirical research methodologies across various disciplines. This journal aims to provide a platform for researchers, scholars, educators, and practitioners to share insights, methodologies, and findings that contribute to the improvement of empirical research practices and the enhancement of evidence-based decision-making.

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The Determinants of Sovereign Credit Default Swaps (CDS) Spreads

1 Swansea Business Campus, UWTSD, High Street, Swansea SA1 1NE,United Kingdom

Volume 1

Issue 2

Page: [79 - 107]

Published Online: September 13, 2024

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  • Abstract

    The paper examines the determinants of sovereign CDS spreads
    for 19 different primary sovereigns from January 2009 to December
    2018, using several macroeconomic variables. We apply a
    panel vector autoregressive (PVAR) model using a system-generalized
    method of moment (System-GMM) methodology, to analyse
    the relationship between the CDS spreads and its macroeconomic
    determinants. Our model combines both local factors, such
    as GDP growth rate, import, export, inflation rate, the balance
    of payment, and government external debt with global factors
    such as S&P 500 Index (SP500) returns, CBOE Market Volatility
    Index (VIX), and 10-year U.S. Treasury. We find that both local
    (such as inflation and government external debt), and global
    (e.g., VIX) determinants of sovereign CDS spreads are statistically
    significant through various periods for most maturities.

    Keywords: Sovereign CDS pricing Panel vector autoregressive model Generalized method of moment

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