Financial contagion dynamics from the US to the PIIGS amidst the global financial crisis

Christos Tzomakas

The Quarterly Review of Economics and Finance, 2024, vol. 97, issue C

Abstract: The European Monetary Union (EMU) sovereign debt crisis has been thoroughly investigated in the literature. However, our analysis attempts to shed light on the link between the U.S. and the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) bond markets during the Great Recession. We employ a daily 12-year period dataset and utilize an EGARCH-X approach. Our results reveal significant contagion effects from the U.S. bond market towards the yields of PIIGS bonds. However, our findings suggests that the distribution imposed on the standardized residuals is crucial for identifying the magnitude of the contagion.

Keywords: Financial crisis; Contagion; PIIGS; European sovereign debt crisis; Great Recession; EGARCH; Heavy-tailed distributions (search for similar items in EconPapers)
JEL-codes: C32 F30 G01 G10 G15 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:97:y:2024:i:c:s1062976924001017

DOI: 10.1016/j.qref.2024.101895

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