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Financial stress transmission in EMU sovereign bond market volatility: A connectedness analysis

Fernando Fernández-Rodríguez (), Marta Gómez-Puig () and Simon Sosvilla-Rivero ()
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Fernando Fernández-Rodríguez: Department of Quantitative Methods in Economics - Universidad de Las Palmas de Gran Canaria

No 15-02, Working Papers from Asociación Española de Economía y Finanzas Internacionales

Abstract: This paper measures the connectedness in EMU sovereign market volatility between April 1999 and January 2014, in order to monitor stress transmission and to identify episodes of intensive spillovers from one country to the others. To this end, we first perform a static and dynamic analysis to measure the total volatility connectedness in the entire period (the system-wide approach) using a framework recently proposed by Diebold and Yılmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each country and apply panel model techniques to investigate its determinants. Finally, to gain further insights, we examine the timevarying behaviour of net pair-wise directional connectedness at different stages of the recent sovereign debt crisis.

Keywords: Sovereign debt crisis; Euro area; Market Linkages; Vector Autoregression; Variance Decomposition. (search for similar items in EconPapers)
JEL-codes: C53 E44 F36 G15 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-02
New Economics Papers: this item is included in nep-eec and nep-mac
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Working Paper: Financial stress transmission in EMU sovereign bond market volatility: a connectedness analysis (2015) Downloads
Working Paper: Financial stress transmission in EMU sovereign bond market volatility: a connectedness analysis (2015) Downloads
Working Paper: Financial stress transmission in EMU sovereign bond market volatility: A connectedness analysis (2015) Downloads
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