European government bond market integration in turbulent times

Pilar Abad and Helena Chuliá

No 201424, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: In this paper we investigate the dynamics of European government bond market integration during the financial crisis and, subsequently, during the European sovereign debt crisis. Based on the approach developed by Bae et al. (2003), we adopt an intuitive measure of integration: the higher the number of joint extreme price rises or falls (coexceedances), the higher the degree of integration. We also analyse the underlying determinants of the dynamics of integration using a binomial logistic regression. Our results reveal that the level of integration of European government bond markets with the euro area has changed over time, with notable differences between the financial and the European sovereign debt crises. We find that the Euribor, unexpected monetary policy announcements from the ECB and both regional and international volatility play an important role in determining the level of integration, and that, in general, the relevance of these factors does not change between the financial and the sovreign debt crises.

Keywords: Financial integration; European government bond markets; coexceedances; extreme returns; logistic regression. JEL classification: C25; F36; G15 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014-10, Revised 2014-10
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ira:wpaper:201424

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