The contagion of the Greek debt crisis on the EMU sovereign bond markets: a Garch-DCC approach

Oussama Kchaou and Makram Bellalah

International Journal of Entrepreneurship and Small Business, 2020, vol. 39, issue 1/2, 100-120

Abstract: We use the dynamic conditional correlation (DCC) model of Engle (2002) to examine the contagion effects from the Greek debt crisis on seven Economic and Monetary Union (EMU) sovereign bond markets. Following this purpose, daily data on ten-year sovereign bond yields for each market were collected for a period ranging from 1 September 2009 to 31 December 2015. We show a strong evidence of contagion effects from the Greek sovereign bond market to those of the other peripheral countries during the spring of 2010 suggesting a «wake-up call contagion» phenomenon. Except for this period, the DCC return series strongly reject the hypothesis of contagion stemming from the ten-year Greek government bond to our seven sovereign debt markets. We thus argue that over time, investors became more confident that the Greek debt crisis was a special case independent from the other countries. Our results are very important for policymakers and investors.

Keywords: contagion; Greek debt crisis; EMU sovereign bonds; DCC model. (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijesbu:v:39:y:2020:i:1/2:p:100-120

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