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 s...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/289701613502786051/The-Impact-of-Oil-Shocks-on-Sovereign-Default-Risk http://hdl.handle.net/10986/35142 |
| Summary: | 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. |
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