Measuring Sovereign Contagion in Europe

By Massimiliano Caporin, Loriana Pelizzon, Francesco Ravazzolo, Roberto Rigobon. 2014

257 citations recorded by the source corpus.

This paper analyzes sovereign risk shift-contagion, i.e. positive and significant changes in the propagation mechanisms, using bond yield spreads for the major eurozone countries. By emphasizing the use of two econometric approaches based on quantile regressions (standard quantile regression and Bayesian quantile regression with heteroskedasticity) we find that the propagation of shocks in euro's bond yield spreads shows almost no presence of shift-contagion. All the increases in correlation we have witnessed over the last years come from larger shocks propagated with higher intensity across Europe.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/b10bdf87d6964ea8581c82c111b31db713c15566

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Citations in the corpus

The Dynamics of Spillover Effects during the European Sovereign Debt Turmoil (2014, unknown): “Caporin et al. (2012) study sovereign risk contagion within the euro area countries.”
Measuring Bilateral Spillover and Testing Contagion on Sovereign Bond Markets in Europe (2014, methodology): “…tests for contagion suffer from a simultaneity bias between correlated asset prices, and from changes in co-movement unrelated to transmission but due to modification of the size and volatility of the shocks (Caporin et al., 2013).5 This invalidates their application to the eurozone crisis.”
Credit Default Swaps: A Survey (2014, background): “total spreads rather than the decomposition, Carlos Caceres and Segoviano (2010) argue that risk aversion was responsible for the widening of sovereign spreads during the early period of the crisis.”
Quantile Connectedness: Modeling Tail Behavior in the Topology of Financial Networks (2022, unknown): “…our use of quantile regression to study extreme events closely resembles a branch of the systemic risk literature that is well-represented by Betz et al. (2016) and Caporin et al. (2018), both of which use quantile regression to study the propagation of adverse shocks through the financial markets.”
Systemic risk in European sovereign debt markets: A CoVaR-copula approach (2015, background): “Further studies, using credit default swaps, examined sovereign risk contagion among Eurozone countries (see, e.g., Missio and Watzka, 2011; Arezki et al., 2011; Alter and Beyer, 2012; Caporin et al., 2013).”
Conditional Euro Area Sovereign Default Risk (2014, unknown): “Benzoni et al. (2011), and Caporin et al. (2012a) model sovereign risk conditions in the euro area, and find evidence for risk contagion.”