Time-frequency quantile co-movement between agricultural commodities and sovereign CDS: Evidence from Latin America countries

This study investigates the relationship between sovereign credit default swaps (CDS) and major agricultural commodities in Latin America countries across different investment periods and market conditions. Utilizing wavelet and quantile cross-spectral coherence methods, our empirical findings reveal the following: The co-movement between sovereign CDS and agricultural commodities exhibits significant heterogeneity under different time-frequency domains, with long-run correlations dominating due to the vulnerability of these countries’ agricultural commodities exports to external shocks. Second, extreme market conditions amplify the positive correlation, reflecting the contagion effect of financialization pressures and intensifying crises. Finally, sovereign CDS are most effective in hedging agricultural commodity risk at monthly and annual frequencies. Overall, these findings provide valuable decision-making references for policymakers and investors.