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The changing international network of sovereign debt and financial institutions

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Dungey, M ORCID: 0000-0003-0074-2314, Harvey, J and Volkov, V ORCID: 0000-0001-9721-9700 2018 , 'The changing international network of sovereign debt and financial institutions' , Journal of International Financial Markets, Institutions and Money, vol. 60 , pp. 149-168 , doi: 10.1016/j.intfin.2018.12.013.

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Abstract

We assess the changing nature of the relationships between financial institutions and sovereigns globally using a weighted, directed network of CDS spreads. The framework includes both the strength and direction of the links in the network, allowing us to formally test for evidence on changes in the completeness of the network, for contagion effects, and for strengthening and weakening of the links in the network. We find evidence of all of these effects for 107 US dollar denominated CDS spreads over 2003–2014. We use the results to illustrate the change from a relatively robust network with some vulnerability to financial sector shocks in the pre-GFC period to a highly fragile network during the GFC and a subsequent return to greater robustness post-GFC where, despite the Greek and European debt crisis effects, fragility is similar when sourced from either financial sector or sovereign debt shocks.

Item Type: Article
Authors/Creators:Dungey, M and Harvey, J and Volkov, V
Keywords: network, sovereign debt, financial institutions, systemic risk, contagion
Journal or Publication Title: Journal of International Financial Markets, Institutions and Money
Publisher: Elsevier
ISSN: 1042-4431
DOI / ID Number: 10.1016/j.intfin.2018.12.013
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Creative Commons License CC-BY-NC-ND 4.0

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