Causality and contagion in EMU sovereign debt markets

Gómez‐Puig, Marta; Sosvilla‐Rivero, Simón

doi:10.1016/j.iref.2014.03.003

Cited by 68 publications

(8 citation statements)

References 61 publications

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“…Gómez-Puig and Sosvilla-Rivero [41] examined the causality and the contagion effect of EMU debt crisis for 11 EMU countries during 1999-2012. They found that there was evidence of contagion of the debt crisis as evidenced by the 41 new causality cases and the intensification of the causality in 42 out of 60 cases and that most breakpoints occurred after the Greek government admitted that its government debt and budget deficit were much worse than previously announced.…”

Section: Literature Surveymentioning

confidence: 99%

Determinants of the Government Bond Yield in Spain: A Loanable Funds Model

Hsing

2015

IJFS

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This paper applies demand and supply analysis to examine the government bond yield in Spain. The sample ranges from 1999.Q1 to 2014.Q2. The EGARCH model is employed in empirical work. The Spanish government bond yield is positively associated with the government debt/GDP ratio, the short-term Treasury bill rate, the expected inflation rate, the U.S. 10 year government bond yield and a dummy variable representing the debt crisis and negatively affected by the GDP growth rate and the expected nominal effective exchange rate.

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Section: Literature Surveymentioning

confidence: 99%

Determinants of the Government Bond Yield in Spain: A Loanable Funds Model

Hsing

2015

IJFS

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“…In the vein of contagion in bond markets, Dungey et al (2006) examine contagion in international bond markets during the Russian crisis in 1997, showing that both emerging and developed markets caught contagion during the crisis period. More recent studies concentrate on spillovers and contagion in Eurozone during the European sovereign debt crisis (Claeys and Vašícˇek, 2014;Gómez-Puig and Sosvilla-Rivero, 2014;Samarakoon, 2017;Bekiros et al, 2018;Caporin et al, 2018). In particular, Gómez-Puig and Sosvilla-Rivero (2014) provide evidence of contagion in the aftermath of the Eurozone sovereign debt crisis, while Claeys and Vašícˇek (2014) and Caporin et al (2018) conclude that contagion has remained subdued.…”

Section: Financial Contagionmentioning

confidence: 99%

The Structure and Degree of Dependence in Government Bond Markets

et al. 2021

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Our study provides new evidence on asymmetric dependencies in international government bond markets, by examining bonds from developed, emerging, and frontier countries, using a quantile regression methodology. We find that the dependence structure for emerging and frontier markets significantly changes during financial crisis periods, which we show has important implications for international diversification of investment strategies. Moreover, we also examine in detail stock-bond correlations and uncover several instances of decoupling. In contrast, developed markets exhibit a more stable dependence pattern. In addition, we document that the degree and structure of dependence vary when foreign currencies are hedged or unhedged, and across bond maturity segments.

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“…Chen et al [20] used the non-linear Granger causality test to study the relationship between the systemic risk of banks and insurance companies, and found that there was significant two-way causality between them. Gómez-Puig et al [21] conducted a non-linear causal test on the yield of 10-year government bonds issued by 11 European countries, and found the intensification of the relationship between markets after the European debt crisis. De et al [22] studied the two-way causality between public debt and GDP growth, and found that only a few countries had significant causality between them.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Since the linear Granger causality test is a traditional method, the extended non-linear Granger causality test can deal well with financial data with non-linear characteristics, including the test based on regression model and non-parametric function. The test based on a regression model may result in the model being misidentified, but the non-parametric function does not have this disadvantage [13][14][15][16][17][18][19][20][21][22]. 7The Copula function, which describes the dependency structure of variables, is the most important tool for financial correlation modeling.…”

Section: Literature Reviewmentioning

confidence: 99%

Financial Risk Contagion in Stock Markets: Causality and Measurement Aspects

Gao

2019

Sustainability

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As global financial markets become highly dependent on each other, risk contagion among stock markets is a primary feature of progressing globalization, which poses uncertainties for government agencies. The deficiency of previous studies is that it is difficult to accurately grasp the direction of risk diffusion in different time periods, and to depict the intensity of risk contagion constantly. Research on causality and measurement of financial risk contagion based on nonlinear causality tests and dynamic Copula methods will help governments to allocate financial resources reasonably and effectively, thus promoting the sustainable development of the social economy and financial markets. Taking the Chinese stock market as an example, this paper evaluated the risk contagion effect between the Chinese stock market and six other stock markets including developed and emerging markets from January 2006 to December 2018. From the aspect of causality, the nonlinear Granger causality test was applied to the entire time period and the phased time periods involving specific events like the subprime mortgage crisis and the Chinese stock market crash. From the aspect of measurement, the dynamic Markov state transition Copula model was used to describe the asymmetrically dependent structure of markets, from which was derived the time-varying lower tail dependence coefficients. The results have been summarized as follows. Firstly, after the outbreak of the subprime mortgage crisis, the stock markets in developed and emerging markets unilaterally affected the Chinese stock market, indicating that China was the recipient at this stage. Then, after the outbreak of the Chinese stock market crash, the Chinese stock market had a risk contagion effect on both Japanese and Russian stock markets, indicating that China became a source of financial risk contagion within a limited area at this stage. Lastly, in terms of the degree of risk contagion, the lower tail dependence coefficients of the Chinese stock market and other markets were significantly increased after the occurrence of specific risk events, while the risk contagion degree of developed markets was higher than that of emerging markets. Policymakers can recognize and apply the characteristics of risk contagion at different stages to refrain from unreasonable institutional arrangements, thus improving the sustainability of economic development.

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Causality and contagion in EMU sovereign debt markets

Cited by 68 publications

References 61 publications

Determinants of the Government Bond Yield in Spain: A Loanable Funds Model

Determinants of the Government Bond Yield in Spain: A Loanable Funds Model

The Structure and Degree of Dependence in Government Bond Markets

Financial Risk Contagion in Stock Markets: Causality and Measurement Aspects

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