Sovereign bond and CDS market contagion: A story from the Eurozone crisis
Theodore Panagiotidis and
Additional contact information
Georgios Bampinas: Panteion University of Social and Political Sciences
Panagiotis Politsidis: Audencia Business School
Post-Print from HAL
We examine the asymmetric and nonlinear nature of the cross-and intra-market linkages of eleven EMU sovereign bond and CDS markets during 2006-2018. By adopting the excess correlation concept of Bekaert et al. (2005) and the local Gaussian correlation approach of Tjøstheim and Hufthammer (2013), we find that contagion phenomena occurred during two major phases. The first, extends from late 2009 to mid 2011 and concerns the outright contagion transmission from EMU South bond markets towards all European CDS markets. The second, is during the revived fears of a Greek exit in November 2011 and is characterized by contagion from (i) CDS spreads in the EMU South towards bond yields in the same bloc and Belgium, and (ii) from Italian and Spanish CDS spreads towards all European CDS spreads. Consistent with their "too big to bail out" status, Italy and Spain emerge as pivotal for the evolution of sovereign credit risk across the Eurozone. Our examination of the relevant mechanisms, highlights the importance of credit risk over liquidity risk, and the containment effect of the naked CDS ban.
Keywords: sovereign bond market; sovereign CDS market; nonlinear dependence; contagion; local Gaussian correlation JEL Classification: G01 G14 G15 C1 C58; local Gaussian correlation JEL Classification: G01; G14; G15; C1; C58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eec and nep-fmk
Note: View the original document on HAL open archive server: https://hal.science/hal-04164277
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Published in Journal of International Money and Finance, inPress, pp.102902. ⟨10.1016/j.jimonfin.2023.102902⟩
Downloads: (external link)
Journal Article: Sovereign bond and CDS market contagion: A story from the Eurozone crisis (2023)
Working Paper: Sovereign bond and CDS market contagion: A story from the Eurozone crisis (2023)
Working Paper: Sovereign bond and CDS market contagion: A story from the Eurozone crisis (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04164277
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().