Testing for a break in the persistence in yield spreads of EMU government bonds

Philipp Sibbertsen, Christoph Wegener () and Tobias Basse

Journal of Banking & Finance, 2014, vol. 41, issue C, 109-118

Abstract: This study tests for a break in the persistence of EMU government bond yield spreads examining data from France, Italy and Spain and using German interest rates as a kind of benchmark. The results reported here provide evidence for breaks between 2006 and 2008. The persistence of the yield spreads against German government bonds has increased significantly after this period. This could be a sign of higher sovereign credit risk (and possibly even redenomination risk) caused by the debt crisis in the euro area. We find clear indications for non-stationary behavior after the breakpoints and empirical evidence for positive excess kurtosis and GARCH-effects when persistence increases.

Keywords: Testing uncovered interest parity; Fractional integration; Changing persistence (search for similar items in EconPapers)
JEL-codes: C22 E43 G12 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Related works:
Working Paper: Testing for a Break in the Persistence in Yield Spreads of EMU Government Bonds (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:41:y:2014:i:c:p:109-118

DOI: 10.1016/j.jbankfin.2014.01.003

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