Measuring Bilateral Spillover and Testing Contagion on Sovereign Bond Markets in Europe
By P. Claeys, Bořek Vašíček. Social Science Research Network, 2014
206 citations recorded by the source corpus.
The global financial crisis rapidly spread across borders and financial markets, and also distressed EU bond markets. The crisis did not hit all markets in the same way. We measure the strength and direction of linkages between 16 EU sovereign bond markets using a factor-augmented version of the VAR model in Diebold and Yilmaz (2009). We then provide a novel test for contagion by applying the multivariate structural break test of Qu and Perron (2007) on this FAVAR detecting significant sudden changes in shock transmission. Results indicate substantial spillover, especially between EMU countries, with Belgium, Italy and Spain being key markets during the financial crisis. Contagion has been a rather rare phenomenon limited to a few well defined moments of uncertainty on financial assistance packages for Greece, Ireland and Portugal. Most of the frequent surges in market co-movement are driven by larger shocks rather than by contagion.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/5c53eecfd0f77647ed29d99d1a332eea8dc550c0
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In Economics and Econometrics
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In Finance
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- Stavros Degiannakis *
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- Rangan Gupta
Citations in the corpus
- Transmission channels of systemic risk and contagion in the European financial network (2015, unknown): “Departing from the financial network approach, Duffie and Singleton (1999), and Ang and Longstaff (2013) use the sovereign credit risk channel to propagate sovereign – specific credit shocks and observe that it causes a cascade of defaults in U.S. and Eurozone sovereigns.”
- Estimation of Panel Group Structure Models with Structural Breaks in Group Memberships and Coefficients (2020, unknown): “For the European debt crisis, the economic structure of southern European countries was affected to a larger extent than that of the central European countries (Claeys and Vaš́ıček, 2014), and its global impact also varied significantly across countries (Stracca, 2015).”
- Oil shocks and stock markets: dynamic connectedness under the prism of recent geopolitical and economic unrest (2017, background): “We highlight that the issue of interdependence (either in a static or a time–varying environment) between financial markets and its importance for portfolio managers, asset pricing model and forecasting has been extensively studied in the literature (see, for instance Apergis et al., 2016; Baruńık e”