Jun 2026· Ekonomi Politika ve Finans Arastirmalari Dergisi· Vol 11, pp. 449-479· 0 citations
Abstract
AbstractThis study aim to how bond yields, yield curves, exchange rates, stock indices, and market volatility impact on Credit Default Swap (CDS) spreads. This study tries to reach a larger sample size by using weekly data from 33 countries account for about 77% of the world’s GDP. CDS determinants are identified by country development level and the sample is divided into developed and emerging economies. The study also covers the effects of global and regional risk factors such as the European debt crisis, the US debt ceiling crisis, the oil shock, the US-China trade war, COVID-19, Russia’s invasion of Ukraine, and the Israel-Hamas conflict. It uses weekly data from 33 countries (both advanced and emerging markets) covering the period from January 1, 2010, to August 30, 2024. The authors use to Pesaran’s (2006) Common Correlated Effects Mean Group estimator and Eberhardt and Bond’s (2009) Augmented Mean Group (AMG) method. Results show that bond yields have a positive effect on CDS spreads in both advanced and emerging economies. Stock market performance negatively affects CDS spreads, while exchange rates negatively impact CDS spreads in advanced economies but positively in emerging markets.
Purpose: The purpose of this study is to investigate the stock market risk determinants in South Asian economies. It analyzes the impact of exchange rate and interest rate fluctuations on Value at Risk (VaR). It also assesses how macroeconomic variables influence market volatility for investors and policymakers..
Design/Methodology: Annual panel data for five South Asian countries: Pakistan, Bangladesh, India, Nepal and Sri Lanka, for the years 2014-2024, have been analyzed. Parametric VaR was employed to measure the risk in the stock market, and fixed-effects panel regression was used to analyze the effect of selected macroeconomic variables.
Findings: The findings suggest that the impact of exchange rate and interest rate movements, GDP growth and oil prices are highly significant for the risk of the stock market, and also for the dynamics of the VaR. There is no significant direct effect of inflation, indicating that its effect may be indirect via other macroeconomic variables.
Practical implications: The study is useful to the policymakers for formulating stable monetary policies and to the investors for risk management in watching important macro-economic indicators which influence the volatility of the markets.
Originality: This study was a multi-country empirical evaluation of macroeconomic determinants of VaR in South Asia which was a parametric study. It emphasizes the interrelationships between the roles of domestic macroeconomic factors and external price shocks. The results add to the body of literature on financial-risk in the region.
Wajiha Sehar, A. Mubashir, Um-e Rubab et al.· NUST Business Review· 0 citations
The present study examined how volatility in exchange rates shapes banking-sector financial stability across the G7 and six high-income European countries, consisting of 13 developed economies. The study analyses the time period from 2000 to 2023. To measure volatility, the present study employed the GARCH(1,1) conditional variance of monthly real effective exchange rates. Stability is measured through the following two supporting indicators: Bank Z-score (solvency) and Non-Performing Loan (NPL) ratio (credit quality). Our analysis combines the Fully Modified OLS and two-step System GMM for analysing long-run and dynamic effects. To assess distributional heterogeneity, Method of Moments Quantile Regression (MMQR) is employed, while Dumitrescu–Hurlin tests are used for examining causality. The results show that volatility in exchange rates significantly reduces bank solvency and elevates credit risk. These effects are highly uneven: the adverse impact falls on the most fragile banking systems—those in the lower quantiles of the Z-score distribution and the upper quantiles of the NPL distribution. Causality runs unidirectionally, moving from volatility to instability. Institutional quality, which is proxied by the rule of law and regulatory quality, is seen to significantly decrease the credit-risk channel but not the solvency channel. Our findings provide implications for developed economies and support targeted, fragility-sensitive macro-prudential policy.
Ivana Miklošević, Katerina Fotova Čiković, Anica Vukašinović· Risks· 0 citations
This study investigates the impact of real effective exchange rate (REER) volatility on foreign direct investment (FDI) inflows in three major Central and Eastern European (CEE) economies—Hungary, Poland, and Romania—using quarterly data spanning from 2007-Q1 to 2024-Q4. The exchange rate volatility is modeled using a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) framework, and country-specific relationships are estimated through Autoregressive Distributed Lag (ARDL) bounds testing and Toda–Yamamoto causality analysis. Our research indicates that a uniform relationship does not exist across the region. In Hungary, the utilization of directional FDI data excluding Special Purpose Entities (SPEs), in conjunction with structural breaks and quarterly seasonal controls, reveals a statistically significant nonlinear (inverted U-shaped) relationship between long-run exchange rate volatility and FDI inflows. In addition, domestic financial development exerts a substantial buffering effect on the transmission of volatility in Hungary by bypassing SPE flows that previously obscured this effect. In Poland and Romania, a stronger currency consistently discourages investment by reducing cost competitiveness. Romania shows a distinct pattern: volatility initially attracts FDI, and while deeper financial markets meaningfully dampen this effect, the net relationship remains positive, unlike Hungary, where sufficiently deep credit markets fully reverse it. These results suggest that policymakers should look beyond short-term exchange rate stabilization and instead prioritize structural reforms, competitive exchange rate levels, transparent FDI reporting standards, and deeper domestic financial markets to sustain FDI inflows.
Fatima Kobeissy, Sandor J. Kovacs, L. Nádasi· Economies· 0 citations
The study sought to explore the effects of macroeconomic volatility and interest rate differential
on stock market liquidity in Nigeria and South Africa from 1984 to 2022.The gross domestic
product and Interest rate differentials were used as explained variables, while the money supply
and exchange rate served as explanatory variables. The base year (1984) was marked by Food
and Agricultural Organization (FAO)Launched by the United Nations to assist in alleviating
famine in Africa. A population of 54 countries in Sub-Sahara Africa was sampled, while two
countries were selected based on the volume of their market transactions over the years under
study. We carried out stationarity test, co-integration test, parameter stability test, arch effect and
OLS. Findings indicated that (i) Macroeconomic volatility have a positive and significance effect
on the stock market liquidity in Nigeria, while in South Africa, Macroeconomic volatility have
positive and non-significance effect on the stock market liquidity .(ii) Interest rate have a negative
and non-significance effect on the stock market liquidity in South Africa and Nigeria .It was
recommended that government need to enact sound monetary policies in order to enhance
economic growth in both countries under study. The government will also need to benchmark for
best practices in monetary policy development from those economies that are more advanced in
order to develop better monetary policies that can improve the performance of the stock market.
(ii)The government need to create an enabling environment and promote infrastructural
development to facilitate the ease of stock market activities in particular and financial system of
both countries.
E. Okwor· International Journal of Eco...· 0 citations
This study investigates the dynamics of volatility and its spillover effects between the stock markets of China, India, and Pakistan, and their respective exchange rates (USD/CNY, USD/INR, and USD/ PKR). Volatility is modeled using the Symmetric and Asymmetric BEKK-GARCH (1,1) and DCCGARCH (1,1) models, based on daily return series covering the period from January 1, 2019, to January 31, 2025. The empirical results indicate that both the employed models are adequate for capturing the volatility dynamics. The findings reveal that the highest value of portfolio weights and hedging efficiency of KSE-100 Index–USD/PKR provide optimal portfolio allocation and highest hedging performance compared to other selected stock-exchange relation. Whereas the highest negative hedge ratio shows a strong inverse relationship between stock- exchange rate markets in China most making it the most effective hedging pair in reducing portfolio risk. This suggests that Chinese investors should assign a larger portion of their portfolios to foreign exchange assets compared to equities; therefore, China's stock market is highly sensitive to exchange rate movements.
Unknown authors· Indonesian Capital Market Re...· 0 citations
Type of the article: Research ArticleAbstractExchange rate volatility is a critical macroeconomic risk factor in emerging markets, particularly for export-oriented sectors such as mining in South Africa. The South African mining sector is inherently affected by exchange rate volatility, yet it is the economy’s largest foreign-currency earner through the export of mining resources. The study examines the effect of exchange rate volatility on mining companies’ share returns within South Africa. The study applies the system Generalized Method of Moments (GMM) estimator to account for both endogeneity and dynamic effects, using panel data from 15 Johannesburg Stock Exchange-listed mining companies over the period 2011 to 2024. The empirical results reveal that exchange rate volatility has a positive and significant effect on the share returns of mining companies, with a coefficient of 0.808, and on total returns (1.094). This indicates that higher currency risk is related to higher return premiums. In contrast, a negative and significant relationship exists between exchange rate volatility and share prices (99.45), implying an adverse valuation effect during heightened uncertainty. Regarding the control variables, GDP growth has a positive effect on share returns (8.978), while oil prices exhibit a negative relationship (–0.327). The results of the study support the risk-return trade-off and the flow-oriented exchange rate approach. The study therefore shows that exchange rate volatility plays a dual role through the enhancement of returns while depressing valuations. This highlights the benefits of implementing currency risk management strategies for investors and policymakers.
S. Moyana, Margaret Rutendo Magwedere, G. Marozva· Investment Management & Fina...· 0 citations