Animal spirits vs contagion: which one is the main driver of sovereign yields in Europe?

Miguel Homem Ferreira, Luis Nunes and Jose Tavares

Nova SBE Working Paper Series from Universidade Nova de Lisboa, Nova School of Business and Economics

Abstract: The objective of this paper is to assess the differences between contagion and investors risk aversion in terms of their impact on European sovereign bond yields during the financial crisis. This paper evaluates contagion at banking level, as it has the advantage of capturing the exposure of sovereign debt markets to financial sector s risk and also the contagion between sovereign spreads that occurs through the financial sector channel. The paper analyzes the period from 2008 to 2012 and also the Greek, Portuguese and Spanish bailout periods. The results indicate that the main driver of yields in Europe is risk aversion and not contagion. The main differences between Central and Southern European countries yields are explained by risk aversion. This channel has a much stronger impact on the periphery. On the other hand, contagion exerts a similar influence throughout all European countries.

Pages: 26 pages
Date: 2016
New Economics Papers: this item is included in nep-eec
References: Add references at CitEc
Citations:

Downloads: (external link)
https://run.unl.pt/bitstream/10362/18438/1/WP604.pdf

Related works:
Working Paper: Animal Spirits vs Contagion: Which one is the main driver of sovereign yields in Europe? (2016)
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:unl:unlfep:wp604

Access Statistics for this paper

More papers in Nova SBE Working Paper Series from Universidade Nova de Lisboa, Nova School of Business and Economics Contact information at EDIRC.
Bibliographic data for series maintained by Susana Lopes ().