Sheung-Chi Chow, Rangan Gupta, Tahir Suleman and Wing-Keung Wong

DOI: https://doi.org/10.6000/1929-7092.2019.08.21

Published: 19 February 2019  

Abstract: We examine co-movement and predictability of Bond Spread of BRICS and PIIGS with respect to political risk (PR), financial risk (FR), and economic risk (ER). Our linear Granger causality findings imply that PR is the most important risk in predicting bond spread, followed by ER in both BRICS and in PIIGS, while FR is useful in predicting bond spread in BRICS only. Our nonlinear individual causality results infer that ER is the most important risk in predicting bond spread, followed by FR, and PR. We make a conjecture that linear and nonlinear causality are independent and our findings support this.

Keywords: Country Risk, Bond Spread, Linear and Nonlinear Granger Causality.

Download