Integration and Disintegration of EMU Government Bond Markets

Christian Leschinski, Michelle Voges and Philipp Sibbertsen
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Michelle Voges: Faculty of Economics and Management, Leibniz University Hannover, D-30167 Hannover, Germany

Econometrics, 2021, vol. 9, issue 1, 1-17

Abstract: It is commonly found that the markets for long-term government bonds of Economic and Monetary Union (EMU) countries were integrated prior to the EMU debt crisis. Contrasting this, we show, based on the interrelation between market integration and fractional cointegration, that there were periods of integration and disintegration that coincide with bull and bear market periods in the stock market. An econometric argument about the spectral behavior of long-memory time series leads to the conclusion that there is a stronger differentiation between bonds with different default risks. This implied the possibility of macroeconomic and fiscal divergence between the EMU countries before the crisis periods.

Keywords: fractional cointegration; market integration; yield spreads; EMU (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Integration and Disintegration of EMU Government Bond Markets (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:9:y:2021:i:1:p:13-:d:517289

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