Spillover Among Sovereign Credit Risk and the Role of Political Risk: Evidence from Oil-Exporting Economies

The study investigates the relationship between political signal quality, uncertainty measures, and sovereign CDS connectedness among major oil-exporting countries using a time-varying parameter vector autoregressive (TVP-VAR) approach along with regression and quantile-based techniques. The findings indicate a moderate degree of sovereign connectedness, suggesting the presence of cross-country spillover effects in sovereign risk markets. The results further show that Qindex is negatively associated with sovereign connectedness both in the case of normal market conditions and mild stress levels. In contrast, conventional uncertainty indicators appear to exert relatively weaker effects across model specifications. Overall, the findings suggest that the informational quality of political communication may play a role in shaping sovereign spillover dynamics alongside broader macroeconomic and financial conditions.