Drawing on the methodology proposed by Garcia-de-Andoain and Kremer (2018), SovCISS incorporates key factors - credit risk, volatility, and liquidity - to provide a comprehensive overview of potential market pressures in the Romanian bond market. The indicator’s empirical applications reveal a notable alignment between Romania’s market and those of the Euro Area and three major Central European economies (Poland, Hungary, and the Czech Republic), underscoring shared susceptibilities to external shocks. The analysis highlights a balanced contribution of credit risk, volatility, and bid-ask spreads to overall stress levels, although credit spreads have taken on a more substantial role since 2021 in tandem with Romania’s comparatively restrictive monetary stance. By providing early warnings and detailed signals across different maturities, SovCISS helps policymakers respond to looming challenges and reinforce financial stability. This research expands existing literature by introducing a real-time surveillance instrument that strengthens sovereign risk management strategies within Europe’s increasingly interconnected financial environment.
Loading....