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Causality and contagion in peripheral EMU public debt markets: a dynamic approach

Gomez-Puig, Marta and Sosvilla Rivero, Simón (2011) Causality and contagion in peripheral EMU public debt markets: a dynamic approach. [ Working Papers; nº 08/11, ]

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Abstract

Our research aims to analyze the causal relationships in the behavior of public debt issued by peripheral member countries of the European Economic and Monetary Union (EMU), with special emphasis on the recent episodes of crisis triggered in the eurozone sovereign debt markets since 2009. With this goal in mind, we make use of a database of daily frequency of yields on 10-year government bonds issued by five EMU countries (Greece, Ireland, Italy, Portugal and Spain), covering the entire history of the EMU from its inception on 1 January 1999 until 31 December 2010. In the first step, we explore the pair-wise causal rela-tionship between yields, both for the whole sample and for changing subsamples of the data, in order to capture the possible time-varying causal relationship. This approach allows us to detect episodes of conta-gion between yields on bonds issued by different countries. In the second step, we study the determinants of these contagion episodes, analyzing the role played by different factors, paying special attention to instru-ments that capture the total national debt (domestic and foreign) in each country.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Sovereign bond yields, Causality, Time-varying contagion, Euro area, Periph-eral EMU countries.
Subjects:Social sciences > Economics > Finance
Social sciences > Economics > Stock exchanges
Social sciences > Economics > World economy
Social sciences > Economics > Money
Series Name:Working Papers
Volume:
Number:08/11
ID Code:13756
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Deposited On:03 Nov 2011 08:17
Last Modified:06 Feb 2014 09:52

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