Causes and hazards of the euro area sovereign debt crisis: Pure and fundamentals-based contagion
Marta Gómez-Puig () and
Simon Sosvilla-Rivero ()
Economic Modelling, 2016, vol. 56, issue C, 133-147
This paper tries to contribute to the understanding of sovereign debt crises' pattern by empirically investigating the determinants of the recent euro area crisis to assess if its transmission was due to “pure” or “fundamentals-based” contagion. Using sovereign bond yield spreads with respect to Germany for a sample of ten central and peripheral countries from January 1999 to December 2012, we firstly examine the dynamic evolution of Granger-causality within the 90 pairs of yield spreads in our sample to detect episodes of contagion (associated with episodes of significant intensification in causality). Secondly, we make use of a logit model to explore whether there is evidence of “pure contagion” or “fundamentals-based contagion”, by trying to determine which factors might have been behind the detected contagion episodes. Our results suggest that contagion episodes are concentrated just after the inception of the EMU and matching the Global Financial Crisis, yielding more accurate and sensible indicators than those obtained from DCC-GARCH models used in prior studies. Indeed, they preceded the outburst of the Global Financial Crisis (causality intensification is detected from March 2008), and reached a peak during January–May 2011. Furthermore, they underline the coexistence of “pure” and “fundamentals-based contagion” during the recent European debt crisis.
Keywords: Sovereign bond spreads; Contagion; Granger-causality; Time-varying approach; Euro area; Logit model (search for similar items in EconPapers)
JEL-codes: C35 C53 E44 F36 G15 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (8) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:56:y:2016:i:c:p:133-147
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Series data maintained by Dana Niculescu ().