Does Central Bank Quality Determine Sovereign Ratings and Credit Default Swap Spreads: Evidence from the World?

Artikel

This study innovates from prior research which focuses on the determinants of sovereign ratings and credit default swap spreads for a large sample of countries by incorporating the quality of central banks, let alone refined proxies. Findings show that the explanatory power of both sovereign ratings and CDS spreads model improve by a hefty 11 percent in case of sovereign ratings and 6 to 9 percent in the case of CDS spreads when central bank quality is incorporated. Such a finding bolters the notion that institutional quality does play a preponderant role when it comes to assessing country risk, making it a systematic component of institutional quality. The effect of labour participation implies that countries buffeted by stronger effects of an ageing population have greater propensity of increases in CDS spreads. Evidence is also found as to the driving dynamics of CDS spreads and sovereign ratings to be distinct. Our results hold robust post tackling for endogeneity problem.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Central Banking Theory and Practice ; ISSN: 2336-9205 ; Volume: 5 ; Year: 2016 ; Issue: 3 ; Pages: 5-29 ; Warsaw: De Gruyter Open

Classification and Topics

• Classification: Wirtschaft ; Institutions and the Macroeconomy ; Central Banks and Their Policies ; International Finance: General ; Financial Economics: General
• Subject: Central Banking ; Credit Default Swap Spreads ; Sovereign ratings ; Country risk analysis.

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ramlall, Indranarain
• Event: Veröffentlichung
• (who): De Gruyter Open
• (where): Warsaw
• (when): 2016

Further information

• DOI: doi:10.1515/jcbtp-2016-0017
• Handle: http://hdl.handle.net/10419/217599
• Last update: 10.03.2025, 11:42 AM CET