Oil prices and government bond risk premiums

Herve Alexandre (1) , Benoist Antonin De (1)

1 DRM - Dauphine Recherches en Management

This article analyses the impact of oil price on bond risk premiums issued by emerging economies. No empirical study has yet focussed on the effects of the oil price on government bond risk premiums. We develop a model of credit spread with data from the EMBIG index of seventeen countries, from 1998 to 2008. An analysis in time series has been carried out on each country. Then we use a panel analysis to determine the global impact of oil prices on the risk perceptions of investors. Finally, we suggest a new estimator for the oil price to take into account the effect of the price variance. We show that the oil price influences the risk premiums of sovereign bonds, along with the price volatility that increases the accuracy of the model.

Mots clés: Oil prices; sovereign debt; risk premium

Domaines: Gestion et management

Herve Alexandre, Benoist Antonin De. Oil prices and government bond risk premiums. Lahore Journal of Business, 2010, 1 (1), pp.1-21. ⟨halshs-00642191⟩