What is mine is yours: Sovereign risk transmission during the European debt crisis

Matthew Greenwood-Nimmo, Viet Hoang Nguyen and Yongcheol Shin

Journal of Financial Stability, 2023, vol. 65, issue C

Abstract: We develop an empirical network model to characterize the density of bilateral sovereign credit risk spillovers during the European debt crisis. We show that the spillover density is often asymmetric with heavy tails and that its location and shape vary strongly and systematically in relation to published indicators of systemic stress. Using auxiliary panel data models, we show that the intensity of bilateral spillovers is related to the portfolio investment exposures among country pairs. Because our spillover statistics can be updated daily, they represent a valuable supplement to existing weekly and monthly measures of systemic stress.

Keywords: Sovereign credit risk network; Credit default swaps (CDS); Contagion and systemic stress; Network models and connectedness; Spillover density (search for similar items in EconPapers)
JEL-codes: C58 F45 G15 H63 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:65:y:2023:i:c:s1572308923000037

DOI: 10.1016/j.jfs.2023.101103

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