Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282489 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10801
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We assess the impact of geopolitical risk and world uncertainty on the sovereign debt risk of 26 European Economies during the period 1984-2022, through the implementation of OLS-Fixed Effects regressions and the Generalized Method of Moments (GMM). We find that geopolitical tensions and global uncertainty in border countries contribute to the rise of European country's sovereign risk as measured by 5- and 10-year Credit Default Swaps (CDS) and bond returns. Moreover, this interconnection is more pronounced during turbulent times such as the subprime crisis. Lastly, we found that geopolitical tensions in other country' groups such as South America and Asia have a significant impact on the government risks of European countries.
Subjects: 
geopolitical risk
world uncertainty
political tensions
sovereign risk
European economy
GMM
subprime crisis
JEL: 
C23
E44
G32
H63
Document Type: 
Working Paper
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