Are All Sovereigns Equal? A Test of the Common Determination of Sovereign Spreads in the Euro Area

Heather Gibson, Stephen Hall and George Tavlas

No 14/06, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: With the outbreak of the Greek financial crisis in late 2009, spreads on Greek (and other) sovereigns reached unprecedented levels. Using a panel data of euro-area countries, we test whether the markets treated all euro-area countries in an equal manner over the period 1998:m1 to 2012:m6. In a F-test of the pooling assumptions suggests that Greece, Ireland and Portugal were not part of the overall pool. In a separate test on the individual coefficients we find that the coefficients on these three countries moved in a similar direction away from the pool, suggesting that markets treated these three countries more acutely than the rest of the pool.

Keywords: euro area financial crisis; sovereign spreads; panel data tests (search for similar items in EconPapers)
JEL-codes: C33 E63 G12 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-eec, nep-mac and nep-opm
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Journal Article: Are all sovereigns equal? A test of the common determination of sovereign spreads in the euro area (2015)
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