Sovereign Risk Contagion in East Asia A Mixture of Time-Varying Copulas Approach
This study analyzes sovereign risk contagion between four East Asian economies (China, Hong Kong, Japan, and Korea) and its structural changes through the Global Financial Crisis (GFC) and the European Debt Crisis (EDC) by applying the mixture of time-varying copulas to those economies’ credit defau...
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Published in | Emerging markets finance & trade Vol. 54; no. 7; pp. 1513 - 1537 |
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Main Authors | , , |
Format | Journal Article |
Language | English |
Published |
Abingdon
Taylor & Francis, Ltd
01.01.2018
Taylor & Francis Ltd |
Subjects | |
Online Access | Get full text |
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Summary: | This study analyzes sovereign risk contagion between four East Asian economies (China, Hong Kong, Japan, and Korea) and its structural changes through the Global Financial Crisis (GFC) and the European Debt Crisis (EDC) by applying the mixture of time-varying copulas to those economies’ credit default swap (CDS) spreads.
This article first finds a strong contagion from the US and PIIGS economies to the East Asian sovereign CDS markets and intraregional contagion within the East Asian markets. Second, the impact of contagion is different according to whether it is measured by the linear (Gaussian) or the upper tail dependence. Third, Japan plays an important role in increasing the linear dependence whereas China and Korea are crucial in terms of the upper tail dependence. Lastly, the GFC has structurally increased the linear dependence but not the upper tail dependence between the East Asian sovereign CDS markets. |
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ISSN: | 1540-496X 1558-0938 |
DOI: | 10.1080/1540496X.2018.1445989 |