Sovereign Bond Market Dependencies and Crisis Transmission around the Eurozone Debt Crisis: A Dynamic Copula Approach

Stelios Bekiros, Shawkat Hammoudeh, Rania Jammazi and Duc Khuong Nguyen

No 2017-008, Working Papers from Department of Research, Ipag Business School

Abstract: We examine the dependency between the European government bond markets around the recent sovereign debt crisis. A dynamic copula approach is used to model the time-varying dependence structure of those government bond markets, evaluate the nature and strength of their dependencies over time, and gauge the transmission of the crisis shocks. Our results can be summarized as follows: i) the eurozone sovereign bond markets under consideration have a significant and positive dependence with the Greek and the EMU benchmark sovereign bond markets; ii) the dynamic-BB7 copula function best describes the dependence structure between these sovereign bond markets and provides evidence of asymmetric tail dependence; iii) the conditional probability of crisis transmission from Greece to other eurozone countries is higher than the other way around; and iv) Greece is the most vulnerable country when the eurozone entered into the sovereign debt crisis.

Keywords: Sovereign; bond; market; dependencies; and; crisis; transmission; around; the; eurozone; debt; crisis:; a; dynamic; copula; approach (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017-01-01
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Journal Article: Sovereign bond market dependencies and crisis transmission around the eurozone debt crisis: a dynamic copula approach (2018)
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