A new approach of contagion based on smooth transition conditional correlation GARCH models: An empirical application to the Greek crisis
Henri Audigé ()
No 2013-2, EconomiX Working Papers from University of Paris Nanterre, EconomiX
The objective of this paper is to gauge how and to which extent the surge in Greek sovereign bond rates in 2010 and 2011 has spilled over the rest of the Euro-area. To this end, we rely on a new class of contagion tests based on Smooth Transition Conditional Correlation GARCH models (STCC-GARCH). Our results highlight the existence of contagion and “wake-up call” effects from Greece to Ireland and Portugal in 2010, and a decoupling in the correlations between Greece and other peripheral countries in 2011. Regarding the core countries, our findings suggest flight-to-quality effects from Greece to Germany and the Netherlands.
Keywords: Bond market; contagion; European crisis; multivariate GARCH models (search for similar items in EconPapers)
JEL-codes: C32 C58 G01 G12 (search for similar items in EconPapers)
Pages: 19 pages
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2013-2
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