Sovereign risk dynamics in the EU: The time varying relevance of fiscal and external (im)balances*

IF 5.4 2区经济学 Q1 BUSINESS, FINANCE Journal of International Financial Markets Institutions & Money Pub Date : 2024-07-01 DOI:10.1016/j.intfin.2024.102026

António Afonso , José Alves , Sofia Monteiro

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Abstract

Acknowledging the potential detrimental impact that twin-deficits can have on sovereign risk, this study uses a two-step approach to assess the impact of fiscal and external sustainability on sovereign risk dynamics for a panel of 27 European economies from Q4 2001 to Q3 2022. We first estimate a country-specific time-varying measure of fiscal sustainability, based on the cointegration between government revenues and expenditures and external sustainability, derived from the cointegration of exports and imports. We then use these time-varying coefficients to assess their impact on sovereign risk, proxied by 10-year CDS and CDS spreads (against the US), employing a Weighted Least Squares (WLS) analysis. Notably, we show that an improvement of both fiscal and external sustainability lead to a reduction in sovereign risk. This phenomenon is particularly pronounced for countries experiencing an upward trajectory in public debt levels.

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欧盟的主权风险动态：财政和对外（不）平衡的时变相关性*

考虑到双赤字对主权风险的潜在不利影响，本研究采用两步法评估 2001 年第四季度至 2022 年第三季度期间 27 个欧洲经济体的财政和外部可持续性对主权风险动态的影响。首先，我们根据政府收入和支出之间的协整关系，以及出口和进口之间的协整关系得出的外部可持续性，估算出针对具体国家的财政可持续性时变指标。然后，我们利用这些时变系数，通过加权最小二乘法（WLS）分析，评估它们对主权风险的影响，主权风险由 10 年期 CDS 和 CDS 利差（对美国）表示。值得注意的是，我们发现财政和外部可持续性的改善会导致主权风险的降低。这一现象在公共债务水平呈上升趋势的国家尤为明显。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of International Financial Markets Institutions & Money Multiple-

CiteScore

6.60

自引率

10.00%

发文量

142

期刊介绍： International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.