 Correlation and volatility on bond markets during the EMU crisis: does the OMT change the process ?Franck Martin and Zhang Jiangxingyun Economics Bulletin, 2014, vol. 34, issue 2, 1327-1349 Abstract: This article studies the correlation and volatility transmission between the European sovereign debt markets during the period of 2008-2013. By applying a multivariate GARCH model and a flight-to-quality test, the empirical results support not only the existence of flight-to-quality from the periphery countries (Italy, Portugal, Spain, Ireland and Greece) to the pivot countries (France and Germany), but also the flight within each group. This can be explained by a new phenomenon of speculation in bond markets which didn't exist before the debt crisis. However, the estimations bring little evidence that allow us to generalize it to all markets. It seems that in terms of volatility, the pivot countries are relatively difficult to be influenced by the external turbulence. Although we prefer to believe that Europe has walked out of the sovereign debt crisis after the Outright Monetary Transaction (OMT) plan, this study doesn't bring much support for this point of view. Keywords: EMU debt crisis; bond markets; OMT; Draghi Put; multivariate GARCH model; flight to quality; speculation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-14-00505 Access Statistics for this article More articles in Economics Bulletin from AccessEcon |
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