Abstract
•We examine the impact of oil, VIX and federal funds rate on US financial credit markets.•We use the quantile ARDL model to account for the impacts under different distributions.•The federal funds rate and the VIX increase the credit risk of the financial sector when the credit risk is on a rising trend.•Oil prices, and to a lesser extent, decrease the credit risk.•The short- and long-run impacts of the risk factors are time-varying and heterogeneous across the different credit market states.
This paper examines the quantile-dependent short- and long-run impact of the FFR, VIX index and crude oil prices on the credit risk of the U.S. banking, financial services and insurance sectors. Using the quantile autoregressive distributed lag model, we find that the federal funds rate and the equity volatility mainly increase the credit risk of the financial sector when the credit risk is on a rising trend. However, oil prices, and to a lesser extent, decrease the credit risk. The short- and long-run impacts of the considered risk factors are time-varying and heterogeneous across the different credit market states.