Working Paper
Sovereign Risk and Financial Risk
Gilchrist, Simon; Wei, Bin; Yue, Vivian Z.; Zakrajšek, Egon (2021-11-24)
In this paper, we study the interplay between sovereign risk and global financial risk. We show that a substantial portion of the comovement among sovereign spreads is accounted for by changes in global financial risk. We construct bond-level sovereign spreads for dollar-denominated bonds issued by more than 50 countries from 1995 to 2020 and use various indicators to measure global financial risk. Through panel regressions and local projection analysis, we find that an increase in global financial risk causes a large and persistent widening of sovereign bond spreads. These effects are ...
FRB Atlanta Working Paper , Paper 2021-27

Working Paper
Sovereign Risk and Financial Risk
Gilchrist, Simon; Wei, Bin; Zakrajšek, Egon; Yue, Vivian Z. (2021-11-24)
In this paper, we study the interplay between sovereign risk and global financial risk. We show that a substantial portion of the comovement among sovereign spreads is accounted for by changes in global financial risk. We construct bond-level sovereign spreads for dollar-denominated bonds issued by more than 50 countries from 1995 to 2020 and use various indicators to measure global financial risk. Through panel regressions and local projection analysis, we find that an increase in global financial risk causes a large and persistent widening of sovereign bond spreads. These effects are ...
FRB Atlanta Working Paper , Paper 27