We analyse how the Credit Default Swaps (CDS) are related to sovereign risk in Brazil, Chile, Colombia, and Mexico, during the period 2010-2019. Dynamic conditional correlation (DCC) models and Granger causality tests are estimated. There is a decreasing general trend in the correlations of the last years of the sample, which can be explained by an improvement in the sovereign debt credit rating and a fall in investment risk in Colombia, Chile, and Brazil. In addition, the empirical results show that the CDS influences the behaviour of public debt bonds
CITATION STYLE
Arroyo, J. L. M., & Rodríguez, N. J. M. (2021). Martínez Arroyo, J. L., & Marín Rodríguez, N. J. (2021). Dynamic relationship between Credit Default Swaps and sovereign debt. Analysis on the Latin- American context. Cuadernos de Economía, 40(83), 583-608. Cuadernos de Economia (Colombia), 40(83), 583–608. https://doi.org/10.15446/cuad.econ.v40n83.81997
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