Global Monetary Conditions and Sovereign CDS Connectedness in Emerging Markets: A Quantile Network Approach

This paper examines whether global monetary conditions are embedded in the spillover structure of sovereign credit risk across emerging markets and whether that role changes across market states. Using monthly data for 15 emerging-market 5-year sovereign CDS series from March 2008 to February 2026, we construct a World Interest Rate (WIR) from the common component of shadow or policy rates in the United States, the euro area, Japan, the United Kingdom, Switzerland, and Canada. The empirical analysis is based on a rolling quantile vector autoregression connectedness framework applied to transformed CDS and WIR series. The results show that sovereign CDS spillovers are strongly state dependent. Total connectedness is already high at the center of the distribution, but rises markedly in both tails, producing a clear U-shaped quantile profile. The WIR is clearly integrated into the network, although not as a uniformly dominant transmitter. In central and intermediate quantiles it behaves mainly as a net receiver of spillovers, while in more stressed upper-tail conditions it becomes less absorbent and can occasionally shift into a mild transmitting role. These findings suggest that global monetary conditions matter within the sovereign CDS network, but in a conditional rather than uniform way.

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Publication Details

Journal
Journal of risk and financial management
Published
2026-05-11
DOI
https://doi.org/10.3390/jrfm19050347
Primary Topic
Credit Risk and Financial Regulations
Type
article
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article

Global Monetary Conditions and Sovereign CDS Connectedness in Emerging Markets: A Quantile Network Approach

Orlando Joaqui-Barandica, Jesús A. Gómez-Daza, Víctor A. Peña-Vargas
Journal of risk and financial management
Credit Risk and Financial Regulations
article

Global Monetary Conditions and Sovereign CDS Connectedness in Emerging Markets: A Quantile Network Approach

Orlando Joaqui-Barandica, Jesús A. Gómez-Daza, Víctor A. Peña-Vargas
article en

Abstract

This paper examines whether global monetary conditions are embedded in the spillover structure of sovereign credit risk across emerging markets and whether that role changes across market states. Using monthly data for 15 emerging-market 5-year sovereign CDS series from March 2008 to February 2026, we construct a World Interest Rate (WIR) from the common component of shadow or policy rates in the United States, the euro area, Japan, the United Kingdom, Switzerland, and Canada. The empirical analysis is based on a rolling quantile vector autoregression connectedness framework applied to transformed CDS and WIR series. The results show that sovereign CDS spillovers are strongly state dependent. Total connectedness is already high at the center of the distribution, but rises markedly in both tails, producing a clear U-shaped quantile profile. The WIR is clearly integrated into the network, although not as a uniformly dominant transmitter. In central and intermediate quantiles it behaves mainly as a net receiver of spillovers, while in more stressed upper-tail conditions it becomes less absorbent and can occasionally shift into a mild transmitting role. These findings suggest that global monetary conditions matter within the sovereign CDS network, but in a conditional rather than uniform way.

Journal of risk and financial managementVol. 19(5)
Pontificia Universidad Javeriana (CO), Universidad del Valle (CO)
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Openalex Percentile: Top 5%
Credit Risk and Financial Regulations
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Global Monetary Conditions and Sovereign CDS Connectedness in Emerging Markets: A Quantile Network Approach — Orlando Joaqui-Barandica, Jesús A. Gómez-Daza, et al. · Journal of risk and financial management (2026) | TGRS Research Map | TGRS