Pure or wake-up-call contagion? Another look at the EMU sovereign debt crisis

Raffaela Giordano (), Marcello Pericoli and Pietro Tommasino

No 904, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We test whether the sharp increase in sovereign spreads of euro area countries with respect to Germany after the explosion of the Greek crisis was due to deteriorating macroeconomic and fiscal fundamentals or to some form of financial contagion. Our analysis includes indicators of domestic and external imbalances which were mostly disregarded by previous studies, and distinguishes between investors' increased attention to the variables which ultimately determine the creditworthiness of a sovereign borrower (wake-up-call contagion) and behaviour not linked to fundamentals (pure contagion). We find evidence of wake-up-call contagion but not of pure contagion.

Keywords: sovereign bond spread; contagion; non-stationary panels. (search for similar items in EconPapers)
JEL-codes: E62 G01 H62 (search for similar items in EconPapers)
Date: 2013-04
New Economics Papers: this item is included in nep-eec and nep-mac
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Citations: View citations in EconPapers (130)

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Journal Article: Pure or Wake-up-Call Contagion? Another Look at the EMU Sovereign Debt Crisis (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_904_13

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