S-Space College of Social Sciences (사회과학대학) Institute of Economics Research (경제연구소) Seoul Journal of Economics (SJE) Seoul Journal of Economics vol.24 no.1~4 (2011)
Determinants of Banks CDS Spreads and Policy Implications
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- Issue Date
- Seoul Journal of Economics, Vol.24 No.4, pp. 575-591
- CDS spreads ; Panel analysis ; Foreign exposure
- This paper analyzes the determinants of CDS spreads of major international
banks using the data period of 2005~2009, which includes
the global financial crisis. Taking into account that CDS spreads of
Korean banks, for example, rose sharply although they were financially
solid preceding the crisis period, we consider macroeconomic
variables that reflect the economic fundamentals and foreign liquidity
conditions of the economy, in addition to the financial indicators of
banks. Empirical results, based on a panel regression analysis of 40
major international banks, shows that macroeconomic variables such
as the fiscal balance, foreign reserves, foreign exposure, and financial
indicators such as banks capital, loan-to-asset ratio, and loan-todeposit
ratio matter significantly in determining banks CDS spreads.
The results also show that certain variables became significant during
the crisis period, which implies that it is important to manage and
monitor certain variables during such periods.
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