Spanning trees and the Eurozone crisis

João Dias

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 23, 5974-5984

Abstract: The sovereign debt crisis in the euro area has not yet been solved and recent developments in Spain and Italy have further deteriorated the situation. In this paper we develop a new approach to analyze the ongoing Eurozone crisis. Firstly, we use Maximum Spanning Trees to analyze the topological properties of government bond rates’ dynamics. Secondly, we combine the information given by both Maximum and Minimum Spanning Trees to obtain a measure of market dissimilarity or disintegration. Thirdly, we extend this measure to include a convenient distance not limited to the interval [0, 2]. Our empirical results show that Maximum Spanning Tree gives an adequate description of the separation of the euro area into two distinct groups: those countries strongly affected by the crisis and those that have remained resilient during this period. The measures of market dissimilarity also reveal a persistent separation of these two groups and, according to our second measure, this separation strongly increased during the period July 2009–March 2012.

Keywords: Maximum spanning tree; Eurozone; Sovereign debt; Government bonds; Crisis (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437113007127
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:392:y:2013:i:23:p:5974-5984

DOI: 10.1016/j.physa.2013.08.001

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().