Granger-causality in peripheral EMU public debt markets: A dynamic approach

Marta Gómez-Puig () and Simon Sosvilla-Rivero

Journal of Banking & Finance, 2013, vol. 37, issue 11, 4627-4649

Abstract: Our research aims to analyze the possible existence of Granger-causal relationships in the behavior of public debt issued by peripheral member countries of the European Economic and Monetary Union (EMU), with special emphasis on the recent episodes of crisis triggered in the eurozone sovereign debt markets since 2009. With this goal in mind, we make use of a database of daily frequency of yields on 10-year government bonds issued by five EMU countries (Greece, Ireland, Italy, Portugal and Spain), covering the entire history of the EMU from its inception on 1 January 1999 until 31 December 2010. In the first step, we explore the pair-wise Granger-causal relationship between yields, both for the whole sample and for changing subsamples of the data, in order to capture the possible time-varying causal relationship. This approach allows us to detect episodes of significant increase in Granger-causality between yields on bonds issued by different countries. In the second step, we study the determinants of these episodes, analyzing the role played by different factors, paying special attention to instruments that capture the total national debt (domestic and foreign) in each country.

Keywords: Sovereign bond yields; Granger-causality; Time-varying approach; Euro area; Peripheral EMU countries (search for similar items in EconPapers)
JEL-codes: E44 F36 G15 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:11:p:4627-4649

DOI: 10.1016/j.jbankfin.2013.05.002

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