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Title: Does Economic Policy Uncertainty Drive CDS Spreads?
Authors: Wisniewski, Tomasz Piotr
Lambe, Brendan John
First Published: 8-Oct-2015
Publisher: Elsevier
Citation: International Review of Financial Analysis, 2016 (In press)
Abstract: This study analyzes the dynamic interactions between changes in economic policy uncertainty and the fluctuations in cost of credit protection. We find that the differenced iTraxx and CDX indices are Granger-caused by variations in the political environment. Within a Vector Autoregressive framework, impulse response functions show a significant reaction of the CDS spreads to shocks in the policy risk. Implied in these findings is the possibility that country-level risk can permeate to the corporations. Furthermore, financial institutions and traders should closely monitor political developments in order to better predict the CDS premia.
ISSN: 1057-5219
Embargo on file until: 1-Jan-10000
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2015, Elsevier.
Description: This article is currently under permanent embargo pending publication. After publication, a 36-month embargo will apply, in accordance with the publisher's Sharing Policy.
Appears in Collections:Published Articles, School of Management

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