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Sovereign risk connectedness: the impact of ECB’s policy announcements in Central and Eastern Europe

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  • C. Ciocirlan

    (National University of Political Studies and Public Administration)

  • M. Nițoi

    (Romanian Academy)

Abstract

This paper presents credit risk transmission patterns in Central and Eastern Europe by applying a new mix of methods on sovereign credit default swaps market. The degree of connectedness among sovereigns is examined around the European Central Bank unconventional monetary policy announcements. Although transmission patterns do not substantially change over time, we find that asset purchase programs contributed to spillover reduction in high credit risk networks mostly before the implementation of zero lower bound rate policy. The results suggest that over time unconventional monetary policies substantially decrease credit risk in the European Union, but positive spillover transmission to Central and Eastern Europe depends on markets’ promptness to incorporate information.

Suggested Citation

  • C. Ciocirlan & M. Nițoi, 2023. "Sovereign risk connectedness: the impact of ECB’s policy announcements in Central and Eastern Europe," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(4), pages 1025-1054, November.
    • Handle: RePEc:kap:empiri:v:50:y:2023:i:4:d:10.1007_s10663-023-09583-y
    DOI: 10.1007/s10663-023-09583-y
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    More about this item

    Keywords

    Sovereign credit risk; Unconventional monetary policy; Network estimation; Central and Eastern Europe; CDS;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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