Predictive power of oil prices on CDS spread dynamics of oil-producing countries
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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in: Energy Economics, Jahrgang 145, 108375, 05.2025.
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - Predictive power of oil prices on CDS spread dynamics of oil-producing countries
AU - Wegener, Christoph
AU - Basse, Tobias
AU - Maiani, Stefano
AU - Nguyen, Tam Huu
N1 - Publisher Copyright: © 2025
PY - 2025/5
Y1 - 2025/5
N2 - This paper employs predictive regressions to explore the predictability of sovereign Credit Default Swap (CDS) spread dynamics of relevant oil-producing countries. By incorporating oil prices and additional control variables, we predict the rate of CDS spread changes for Brazil, the UK, Malaysia, Norway, Qatar, Russia, Saudi Arabia, the US, and Venezuela. Our findings reveal that (i) the empirical coefficients of determination (R2) indicate low in-sample predictability for our entire period of analysis (2010–2024), the R2 increases markedly when dividing the analysis period into more relevant sub-samples (2010–2016 and 2016–2024); (ii) oil prices are not significant predictors for the full period but become significant in many regressions within sub-samples; (iii) for countries where oil prices are significant in both sub-samples, the coefficient sign changes from negative to positive, suggesting that in more recent years, rising (falling) oil prices signal increasing (decreasing) geopolitical risk, positively (negatively) influencing CDS spreads.
AB - This paper employs predictive regressions to explore the predictability of sovereign Credit Default Swap (CDS) spread dynamics of relevant oil-producing countries. By incorporating oil prices and additional control variables, we predict the rate of CDS spread changes for Brazil, the UK, Malaysia, Norway, Qatar, Russia, Saudi Arabia, the US, and Venezuela. Our findings reveal that (i) the empirical coefficients of determination (R2) indicate low in-sample predictability for our entire period of analysis (2010–2024), the R2 increases markedly when dividing the analysis period into more relevant sub-samples (2010–2016 and 2016–2024); (ii) oil prices are not significant predictors for the full period but become significant in many regressions within sub-samples; (iii) for countries where oil prices are significant in both sub-samples, the coefficient sign changes from negative to positive, suggesting that in more recent years, rising (falling) oil prices signal increasing (decreasing) geopolitical risk, positively (negatively) influencing CDS spreads.
KW - Fiscal stability
KW - Oil prices
KW - Predictive regressions
KW - Economics
UR - http://www.scopus.com/inward/record.url?scp=105000475501&partnerID=8YFLogxK
U2 - 10.1016/j.eneco.2025.108375
DO - 10.1016/j.eneco.2025.108375
M3 - Journal articles
AN - SCOPUS:105000475501
VL - 145
JO - Energy Economics
JF - Energy Economics
SN - 0140-9883
M1 - 108375
ER -