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Causality in the EMU sovereign bond markets

González-Sánchez, Mariano

Finance Research Letters, 2018, vol. 26, issue C, 281-290

Abstract: Sovereign debt markets can be mechanisms of contagion for financial policy interventions, and financial risks in general. This study tests causality in-mean and in-variance on a full interest rate curve. The results for a daily sample of sovereign bond market prices (from France, Germany, Italy, Spain, Switzerland, the United Kingdom and the United States), show that latent factors of the United Stated (long-term) and Germany (short-term) are the main drivers of causality in-mean. The causality in-variance results show that the effect is mostly in the Economic and Monetary Union, highlighting Spain as the main driver.

Keywords: Asymmetric causality; Sovereign bond market; Nelson–Siegel (search for similar items in EconPapers)
JEL-codes: E58 F34 F36 G12 G15 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:finlet:v:26:y:2018:i:c:p:281-290