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Volatility Spillovers among Sovereign Credit Default Swaps of Emerging Economies and Their Determinants

Author

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  • Shumok Aljarba

    (Department of Finance, College of Business Administration, King Saud University, P.O. Box 12371, Riyadh 11451, Saudi Arabia)

  • Nader Naifar

    (Department of Finance, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), P.O. Box 5701, Riyadh 11564, Saudi Arabia)

  • Khalid Almeshal

    (Department of Economics, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), P.O. Box 5701, Riyadh 11564, Saudi Arabia)

Abstract

This paper aims to investigate the volatility spillovers among selected emerging economies’ sovereign credit default swaps (SCDSs), including those of Saudi Arabia, Russia, China, Indonesia, South Africa, Brazil, Mexico, and Turkey. Using data from January 2010 to July 2023, we apply the time-domain and the frequency-domain connectedness approaches.Empirical results show that (i) Indonesia, followed by China and Mexico, are the main transmitters of sovereign credit risk volatility. (ii) Among global factors, the volatility index (VIX), economic policy uncertainty (EPU), and global political risk (GPR) positively impacted spillover on lower and higher quantiles. The results offer critical insights for international investors, policymakers, and researchers, emphasizing the importance of risk-aware investment strategies and cautious policy formulation in the context of financial crises and political events.

Suggested Citation

  • Shumok Aljarba & Nader Naifar & Khalid Almeshal, 2024. "Volatility Spillovers among Sovereign Credit Default Swaps of Emerging Economies and Their Determinants," Risks, MDPI, vol. 12(4), pages 1-17, April.
    • Handle: RePEc:gam:jrisks:v:12:y:2024:i:4:p:71-:d:1380251
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    References listed on IDEAS

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    Cited by:

    1. Naifar, Nader, 2024. "Examining the nexus between oil shocks and sovereign credit risk: Multidimensional insights from major oil exporters," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).

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