Financial Contagion and the European Debt Crisis

Fabricio Missio and Sebastian Watzka

No 3554, CESifo Working Paper Series from CESifo

Abstract: Since the beginning of 2010, the Euro Area faces a severe sovereign debt crisis, now generally known as the Euro Crisis. While the Euro Crisis has its origin in Greece, problems have now spread to several other European countries as well. Dynamic conditional correlation models (DCC) are estimated in order to assess if contagious effects are identifiable during the Euro Crisis, or if the countries’ problems are instead due to fundamental problems in the affected economies. Our findings show that there is contagion within the Euro Area. Additionally, contagious effects generated by rating announcements are documented. These results are crucial when it comes to choosing the correct measure and timing of policy intervention.

Keywords: contagion; DCC; Euro Crisis (search for similar items in EconPapers)
JEL-codes: E43 E44 E63 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (71)

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