| Description |
1 online resource (78 pages) : illustrations (some color), tables |
| Series |
IMF working paper ; WP/14/17 |
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IMF working paper ; WP/14/17.
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| Contents |
Cover; Contents; Executive Summary; I. Introduction; II. Developments in Sovereign CDS Spreads and Fundamentals; Figures; 1. Average 5-year Sovereign CDS Spreads (in basis points, lhs axis) and the VIX Index* (rhs axis); Tables; 1. Average Monthly 5-year Sovereign CDS Spreads in Selected CESEE and Euro Area Countries; 2. Real GDP Level: Deviation from Pre-Crisis Peak; III. Literature Review; 3. CESEE: Current Account Balance; 4. CESEE: Fiscal Balance; IV. Data; V. The Role of Spillovers from the Euro Area Periphery |
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5. The Percentage Share of Shocks from the Euro Area Periphery Countries in the Total Cross- Country Shocks Affecting the CDS Spreads of Each Countries, October 2008- March 20096. The Percentage Share of Shocks from the Euro Area Periphery Countries in the Total Cross- Country Shocks Affecting the CDS Spreads of Each Country, May 2010-June 2012; 2. The Distribution of Cross-Country Shocks to CDS Spread Forecast Error Variance in Selected CESEE and Euro Area Countries Between October 2008 and March 2009 |
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3. The Distribution of Cross-Country Shocks to CDS Spread Forecast Error Variance in Selected CESEE and Euro Area Countries between May 2010 and June 20124. Simple Measures of Cross-Country Variation of CDS spreads in the CESEE Region; VI. The Role of Fundamentals in Explaining Sovereign CDS Spreads; A. Explanatory Variables; 7. The Percentage Share of Idiosyncratic Shocks in the Total Forecast Error Decomposition of Selected CESEE Countries; B. Estimation Methodology; C. Estimation Results; 5. Correlation of Main Variables; 6. CDS Spreads: Estimation the Norm (with Country Dummies) |
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7. CDS Spreads: Structural Break Test Results8a. Estimation Results for Equation (6.2), Various Specification for the Euro Crisis Period; 8b. Estimation Results for Equation (6.2), Various Specification (before the Euro Crisis Period); D. CDS Spreads Decomposition Based on the Model: An Illustration; 8. CDS Spread Norm Decompostion for Latvia; 9. CDS Spread Norm Decomposition for Slovenia; E. Out of Sample Forecast Performance: CDS Spreads in the Post-OMT Period; 10. Actual and One Step Ahead Forecasts in July 2012 and December 2012 |
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11. Average Changes in Key Determinants of CDS Spreads between July 2012 and December 2012 (in Standard deviation)12. CDS spread norm decomposition for Croatia in June2012 and December 2012 (in basis points); VII. Summary and Conclusions; References; Annexes |
| Summary |
By analysing data from January 2007 to December 2012 in a panel GLS error correction framework we find that European countries' sovereign CDS spreads are largely driven by global investor sentiment, macroeconomic fundamentals and liquidity conditions in the CDS market. But the relative importance of these factors changes over time. While during the 2008/09 crisis weak economic fundamentals (such as high current account decifit, worsening underlying fiscal balances, credit boom), a drop in liquidity and a spike in risk aversion contributed to high spreads in Central and Eastern and South-Eastern European (CESEE) countries, a marked improvement in fundamentals (e.g. reduction in fiscal deficit, narrowing of current balances, gradual economic recovery) explains the region's resilience to financial market spillovers during the euro area crisis. Our generalised variance decomposition analyisis does not suggest strong direct spillovers from the euro area periphery. The significant drop in the CDS spreads between July 2012 and December 2012 was mainly driven by a decline in risk aversion as suggested by the model's out of sample forecasts |
| Bibliography |
Includes bibliographical references |
| Notes |
Online resource; title from PDF title page (ebrary, viewed March 7, 2014) |
| Subject |
Credit derivatives -- Europe -- Econometric models
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Swaps (Finance) -- Europe -- Econometric models
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Europe
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| Form |
Electronic book
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| Author |
Sun, Yan, author
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| ISBN |
9781484394168 |
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148439416X |
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