We introduce a new measure of emerging market sovereign credit risk: the local currency credit spread, defined as the spread of local currency bonds over the synthetic local currency risk-free rate constructed using cross-currency swaps. We find that local currency credit spreads are positive...

​We study the effects of the ECB monetary policy and the European crisis resolution policies on the 10 year sovereign bond yields of seven European countries. We find that some of the decisions have had significant impact on sovereign bond yields and have succeeded in reducing stress in the...

This study investigates the term-structure of sovereign emerging market yield spreads by decomposing it into the default risk component and the residual risk premium for Eurobonds of Mexico, Colombia and Brazil. We find that the risk premium tends to increase with maturity and account for the...

This paper aims to quantify the political risk effect and its different economic implications in normal and crisis situations through the proxy analysis of election and the sovereign bond spreads. Our study leads to three main findings. First, in normal economic situations, elections and...

This paper addresses the following questions. Is there evidence of financial contagion in the Eurozone? To what extent a country's vulnerability to contagion depends on "fundamentals" as opposed the government's "credibility"? We look at the empirical evidence on European sovereigns CDS spreads...

We show that sovereign debt is unsustainable if debt contracts are not supported by direct sanctions and default carries only a ban from ever borrowing in financial markets even in the presence of uninsurable risks and time-varying interest rate. This extension of Bulow and Rogoff, 1989 requires...

Previous work has documented a greater sensitivity of long-term government bond yields to fundamentals in Euro area stress countries during the euro crisis, but we know little about the driver(s) of regime-switches. Our estimates based on a panel smooth threshold regression model quantify and...

This paper analyses the dynamics of the credit default swap (CDS) market of PIIGS, France, Germany and the UK for the period of 2005–2010. The study is performed on the basis of the Datastream and DTCC data on CDS spreads and the BIS data on cross-border exposures.The analysis of the data...

This paper aims to quantify the political risk effect and its different economic implications in normal and crisis situations through the proxy analysis of election and the sovereign bond spreads. Our study leads to three main findings. First, in normal economic situations, elections and...

Do governments default on debt denominated in their own currency? We introduce a new measure of sovereign credit risk, the local currency credit spread, defined as the spread of local currency bonds over the synthetic local currency risk-free rate constructed using cross currency swaps. We find...