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Title:Monetary policy spillovers and emerging market credit: The impact of Federal Reserve communications on sovereign CDS spreads PDF Logo
Authors:Fender, Ingo
Hayo, Bernd
Neuenkirch, Matthias
Issue Date:2011
Series/Report no.:Joint discussion paper series in economics 39-2011
Abstract:In this paper, we study the effects of US target rate changes and related communications by members of the Federal Reserve Board of Governors on spreads for emerging market sovereign credit default swaps (CDS). Using GARCH models, we find that during the pre-financial crisis sub-sample (April 2002-July 2007) CDS spreads react more to country-specific factors than to US monetary policy news. This finding is reversed during the financial crisis sub-sample (August 2007-December 2009), when US monetary policy actions and communications affect CDS spreads in a notable way. Finally, our analysis suggests that CDS spreads became more prone to spillover effects during the financial crisis.
Subjects:credit default swaps
emerging markets
Federal Reserve communication
financial crisis
policy spillovers
JEL:E52
G14
G15
Document Type:Working Paper
Appears in Collections:MAGKS Joint Discussion Paper Series in Economics, Universität Marburg

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