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oai:docta.ucm.es:20.500.14352/1188432025-05-23T23:54:55Zcom_20.500.14352_14col_20.500.14352_17

Short- and Long-Run Sovereign Risk Uncertainty in U.S. Credit Default Swaps Guinea Voinea, Laurentiu C11 C32 E32 E44 E62 F34 Sovereign Risk Uncertainty, Short-Run vs. Long-Run Macroeconomic Shocks Bayesian Estimation Kalman Filter State-Space Models. Ciencias Sociales 53 Ciencias Económicas This paper decomposes sovereign risk uncertainty in U.S. credit default swap (CDS) spreads into short-run and long-run components. We employ a Bayesian dynamic factor model within a state-space framework to link observed CDS spreads and macro-financial variables to an unobserved latent risk factor. The short-run component, extracted from shorter-maturity CDS spreads, exhibits higher fluctuations and lower persistence, whereas the long-run component, derived from longer-maturity CDS spreads, captures greater persistence. Our empirical findings reveal that long-run uncertainty has a significantly stronger adverse impact on macroeconomic indicators, reducing consumption and industrial production more than short-run uncertainty. Notably, we document a negative relationship between long-run sovereign risk uncertainty and the Economic Policy Uncertainty (EPU) index, suggesting a key distinction between short-term policy volatility and long-term risk expectations. This result indicates that persistent sovereign risk uncertainty does not necessarily amplify short-term policy uncertainty; rather, it may trigger stabilization measures, such as fiscal consolidation or central bank interventions, as policymakers respond to heightened long-term risks. These findings underscore the importance of distinguishing between short-run and long-run sovereign risk uncertainty, offering a novel framework for macroeconomic analysis and financial stability assessment. Ministerio de Ciencia e Innovación (España) Depto. de Análisis Económico y Economía Cuantitativa Instituto Complutense de Análisis Económico (ICAE) FALSE submitted 2025-03-17T17:47:59Z 2025-03-17T17:47:59Z 2025 technical report NA https://hdl.handle.net/20.500.14352/118843 XXXX-XXXX eng info:eu-repo/grantAgreement//PID2023/138706NB-I00 Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/ open access application/pdf