Multidimensional Assessment of Economies by the Level of Sovereign Risk Premium

In: Moscow University Economics Bulletin, Heft 2, S. 3-27

Abstract

The analysis of the international market for credit default swaps (CDS) shows that the interdependence of sovereign CDS spreads is increasing and the market remains segmented. However, the reduction in the variation of sovereign CDS spreads means increased competition for capital and should be taken into account by monetary authorities of developed countries when they tighten monetary policy. The article shows a significant role of political risks in determining the level of sovereign risk.