Exchange rates, credit default swaps and market volatility of emerging markets: Panel CS-ARDL approach

Alan T. Wang, Chin Chia Liang

研究成果: Article同行評審

摘要

Using the panel-data approach with a sample of emerging countries, this study examines the relationship between exchange-rate movements from 2011 to 2022, on the one hand, and sovereign debt credit default swap (CDS) premiums and market volatility, on the other. To capture the short- and long-run relationships between exchange rates, sovereign CDS, and market volatility, our study applies the cross-section augmented autoregressive distributed lag (CS-ARDL) model by Chudik and Pesaran (2015) with the pooled mean group (PMG) estimation method. The advantages of this setting are that it allows for cross-sectional heterogeneity and dependence. The exchange rate and the sovereign CDS premium are integrated in the long run. The exchange-rate dynamics, the return on CDS, and market volatility are contemporaneously correlated. Furthermore, market volatility and the deviation from the long-run relationship between the exchange rate and CDS also provide predictive information for exchange-rate movements in the next period. These findings shed further light on the forward-premium puzzle.

原文English
頁(從 - 到)176-186
頁數11
期刊Borsa Istanbul Review
24
發行號1
DOIs
出版狀態Published - 2024 1月

All Science Journal Classification (ASJC) codes

  • 金融
  • 經濟學與計量經濟學

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