The impact of the income inequality on the sovereign credit risk: A panel approach for 26 European countries during 2005-2010

• Autor(a) principal: Santos, Andreia Patrícia Ferreira Dias dos
• Data de Publicação: 2014
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/8445
• topic: Sovereign credit risk; Credit default spreads; Income inequality; Fixed effects; Arellano-Bond GMM estimator; Risco soverano; Desigualdade de rendimento; Modelo de efeitos fixos; Estimador GMM Arellano-Bond

The aftermath of the financial crisis that had its beginning in 2007 has put to the fore the increase of the public debt in OECD countries. Global economic recessions and public bailouts of banks have resulted in a significant concern about the sovereign default risk mainly on the Eurozone countries facing structural economic imbalances. Using Credit Default Swaps (CDS) as a measure of sovereign credit risk, the purpose of this study is to analyze the link between sovereign default risk and income inequality for a broad panel of 26 European countries over the years 2005 to 2010. Applying the System GMM techniques the findings support the hypothesis that income inequality is a significant predictor of the sovereign credit risk. The empirical results also show that income inequality has more impact on the dynamics of the CDS spreads in times of economic downturns.