SOVEREIGN RISK DEPENDENCE PATTERN IN EMERGING EUROPE

In this study we implement a flexible model to assess both the strength and the pattern of sovereign risk dependence between several European countries with emerging economies. We employ a market risk approach to analyzing sovereign risk and provide a synoptic interpretation of the results facilitating a better understanding of the interconnectedness of sovereign risk. We conclude that sovereign risk is not a country specific type of risk but rather a reflection of both internal factors and macroeconomic forces external to the country.