Has the CDS market influenced the borrowing cost of European countries during the sovereign crisis?

Anne-Laure Delatte (), Mathieu Gex () and Antonia López-Villavicencio ()
Additional contact information
Anne-Laure Delatte: Rouen Business School
Mathieu Gex: Banque de France, UGA - Université Grenoble Alpes
Antonia López-Villavicencio: CEPN - Centre d'Economie de l'Université Paris Nord - Université Sorbonne Paris Nord

Post-Print from HAL

Abstract: This paper assesses the potential inuence of the growing CDS market on the borrowing cost of sovereign states during the European sovereign crisis. We analyze the sovereign debt market to ascertain the pattern of information transmission between the CDS and corresponding bond markets. Our methodological innovation is the use of a non-linear specication rather than the linear VECM specication customarily employed. Using a panel smooth transition model during 2008-2010 period, we nd that: 1) linearity tests clearly reject the null hypothesis of a linear transmission mechanisms between the bond and the CDS markets; 2) market distress alters the mutual inuence and 3) the higher the distress the more the CDS market dominates the information transmission between CDS and bond markets.

Keywords: European sovereign crisis; panel smooth transition models; cointegration; Sovereign credit default swaps (search for similar items in EconPapers)
Date: 2011-10-25
Note: View the original document on HAL open archive server: https://hal.science/hal-05455750v1
References: Add references at CitEc
Citations:

Published in Journal of International Money and Finance, 2011, 31 (3), pp.481-497. ⟨10.1016/j.jimonfin.2011.10.008⟩

Downloads: (external link)
https://hal.science/hal-05455750v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05455750

DOI: 10.1016/j.jimonfin.2011.10.008

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().