EMU sovereign debt market crisis: Fundamentals-based or pure contagion?
We empirically investigate whether the transmission of the recent crisis in euro area sovereign debt markets was due to fundamentals-based or pure contagion. To do so, we examine the behaviour of EMU sovereign bond yield spreads with respect to the German bund for a sample of both central and periph...
| Autores: | , |
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| Tipo de recurso: | informe técnico |
| Fecha de publicación: | 2014 |
| País: | España |
| Institución: | Universidad Complutense de Madrid (UCM) |
| Repositorio: | Docta Complutense |
| Idioma: | inglés |
| OAI Identifier: | oai:docta.ucm.es:20.500.14352/41634 |
| Acceso en línea: | https://hdl.handle.net/20.500.14352/41634 |
| Access Level: | acceso abierto |
| Palabra clave: | C35 C53 E44 F36 G15 Sovereign bond spreads Contagion Granger-causality Time-varying approach Euro area Ordered logit model Crisis económicas Econometría (Economía) Economía internacional Economía pública 5307.06 Fluctuaciones Económicas 5302 Econometría 5310 Economía Internacional |
| Sumario: | We empirically investigate whether the transmission of the recent crisis in euro area sovereign debt markets was due to fundamentals-based or pure contagion. To do so, we examine the behaviour of EMU sovereign bond yield spreads with respect to the German bund for a sample of both central and peripheral countries from January 1999 to December 2012. First we apply a dynamic approach to analyse the evolution of the degree of Granger-causality within the 90 pairs of sovereign bond yield spreads in our sample, in order to detect episodes of significantly increased causality between them (which we associate with contagion) and episodes of significantly reduced interconnection (which we associate with immunisation). We then use an ordered logit model to assess the determinants of the occurrence of the episodes detected. Our results suggest the importance of variables proxying market sentiment and of variables proxying macrofundamentals in determining contagion and immunisation outcomes. Therefore, our findings underline the coexistence of “pure” and “fundamentals-based contagion” during the recent European debt crisis. |
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