Journal article
Financial linkages between US sector credit default swaps markets
Journal of international financial markets, institutions & money, v 33, pp 223-243
Nov 2014
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
•Dynamic links among the US 5-year financial CDS sector index spreads are examined.•We develop a STECM model accommodating the potential nonlinearity and asymmetry.•Results show significant long-run relationships for two out of the three CDS variables.•These long-run links are asymmetric and nonlinear with two interaction regimes.•Our findings are stronger and more policy oriented when an extended STECM is used.
We investigate the dynamic relationships between the US five-year financial CDS sector index spreads for the banking, financial services and insurance sectors in the short- and long-run over the recent period which is marked by the onset of the global financial crisis. For this purpose, we implement a Smooth Transition Error-Correction Model (STECM) to accommodate the presence of nonlinearities and asymmetry in the adjustment process of the CDS variables toward their long-run equilibrium. Our findings provide evidence of significant long-run equilibrium links for two out of the three CDS indices, which are found to be typically asymmetric and nonlinear. These findings are more potent and more strongly policy oriented when the control variables are introduced into an extended STECM.
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Details
- Title
- Financial linkages between US sector credit default swaps markets
- Creators
- Mohamed Arouri - CRCGM, Université d’Auvergne, FranceShawkat Hammoudeh - Drexel UniversityFredj Jawadi - University of Évry Val d'EssonneDuc Khuong Nguyen - IPAG Business School
- Publication Details
- Journal of international financial markets, institutions & money, v 33, pp 223-243
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000347406800011
- Scopus ID
- 2-s2.0-84907880190
- Other Identifier
- 991019167630104721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics