Publication: Causality and contagion in peripheral EMU public debt markets: a dynamic approach
Loading...
Files
Official URL
Full text at PDC
Publication Date
2011-10
Advisors (or tutors)
Editors
Journal Title
Journal ISSN
Volume Title
Publisher
Instituto Complutense de Estudios Internacionales (ICEI)
Citations
Exportar
Abstract
Our research aims to analyze the causal relationships in the behavior of public debt issued by peripheral member countries of the European Economic and Monetary Union (EMU), with special emphasis on the recent episodes of crisis triggered in the eurozone sovereign debt markets since 2009. With this goal in mind, we make use of a database of daily frequency of yields on 10-year government bonds issued by five EMU countries (Greece, Ireland, Italy, Portugal and Spain), covering the entire history of the EMU from its inception on 1 January 1999 until 31 December 2010. In the first step, we explore the pair-wise causal rela-tionship between yields, both for the whole sample and for changing subsamples of the data, in order to capture the possible time-varying causal relationship. This approach allows us to detect episodes of conta-gion between yields on bonds issued by different countries. In the second step, we study the determinants of these contagion episodes, analyzing the role played by different factors, paying special attention to instru-ments that capture the total national debt (domestic and foreign) in each country.
Nuestra investigación tiene como objetivo analizar las relaciones causales en el comportamiento de la deuda pública emitida por países miembros periféricos de la Unión Económica y Monetaria (UEM), con especial énfasis en los recientes episodios de crisis desatados en los mercados de deuda soberana de la zona euro desde 2009. Con este objetivo, empleamos una base de datos de la frecuencia diaria de los rendimientos de los bonos gubernamentales a 10 años emitidos por cinco países de la UEM (Grecia, Irlanda, Italia, Portugal y España), que abarca toda la historia de la UEM desde su inicio el 1 de enero de 1999 al 31 diciembre de 2010. En la primera etapa, se explora la relación causal por pares entre los rendimientos, tanto para la muestra completa y para submuestras cambiantes de los datos, con el fin de capturar posible relación causal en función del tiempo. Este enfoque nos permite detectar episodios de contagio entre los rendimientos de los bonos emitidos por países distintos. En el segundo paso, se estudian los factores determinantes de estos episodios de contagio, el análisis del papel desempeñado por diferentes factores, prestando especial atención a los instrumentos que capturan la deuda nacional total (doméstica y extranjera) en cada país.
Nuestra investigación tiene como objetivo analizar las relaciones causales en el comportamiento de la deuda pública emitida por países miembros periféricos de la Unión Económica y Monetaria (UEM), con especial énfasis en los recientes episodios de crisis desatados en los mercados de deuda soberana de la zona euro desde 2009. Con este objetivo, empleamos una base de datos de la frecuencia diaria de los rendimientos de los bonos gubernamentales a 10 años emitidos por cinco países de la UEM (Grecia, Irlanda, Italia, Portugal y España), que abarca toda la historia de la UEM desde su inicio el 1 de enero de 1999 al 31 diciembre de 2010. En la primera etapa, se explora la relación causal por pares entre los rendimientos, tanto para la muestra completa y para submuestras cambiantes de los datos, con el fin de capturar posible relación causal en función del tiempo. Este enfoque nos permite detectar episodios de contagio entre los rendimientos de los bonos emitidos por países distintos. En el segundo paso, se estudian los factores determinantes de estos episodios de contagio, el análisis del papel desempeñado por diferentes factores, prestando especial atención a los instrumentos que capturan la deuda nacional total (doméstica y extranjera) en cada país.
Description
Keywords
Citation
Abad, P.; H. Chuliá and M. Gómez-Puig (2010). “EMU and European Government Bond Market Integra-tion”, Journal of Banking and Finance, Vol. 34, pp. 2851–2860.
Abad, P.; H. Chuliá and M. Gómez-Puig (2011). “Time-varying integration in European government bond markets”. Documento de Trabajo 611, Fundación de las Cajas de Ahorros.
Andenmatten, S. and F. Brill (2011). “Measuring Co-Movements of CDS Premia during the Greek Debt Cri-sis”. Discussion Papers 11-04, Department of Economics, University of Bern.
Allen, F.; T. Beck; E. Carletti; P.L. Lane; D. Schoenmaker and W. Wagner (2011). Cross-Border Banking in Europe: Implications for Financial Stability and Macroeconomic Policies. London: Centre for Economic Policy Research Editions.
Akaike, H. (1974). “A New Look at the Statistical Model Identification”, IEEE Transactions on Automatic Control, Vol. 19, pp. 716–723.
Banerjee, A., Dolado, J., Galbraith, J. and Hendry, D. (1993): Cointegration, Error Correction and the Econometric Analysis of Nonstationary Series. Oxford: Oxford University Press.
Bank for International Settlements (2011). “International Banking and Financial Market Developments”, BIS Quarterly Review, June.
Bayoumi, T., Goldstein, M., Woglom, G. (1995). “Do credit markets discipline sovereign borrowers? Evi-dence from the US States”. Journal of Money Credit and Banking, Vol. 27, pp. 1046-1059.
Bekaert, G.; M. Ehrmann; M. Fratzscher and A. Mehl (2011). “Global crises and equity market contagion”. Discussion Paper 8438, Centre for Economic Policy Research.
Barnes, S, Lane, P R and Radziwill A (2010), “Minimising Risks from Imbalances in European Banking”. Working Paper 828, Economics Department, Organization for Economomic Cooperation and Development.
Barrios, S.; P. Iversen.; M. Lewandowska and R. Setze (2009). “Determinants of intra-euro area government bond spreads during the financial crisis”. Economic Paper 388, European Commission.
Blanco, R. (2001). “The euro-area government securities markets. Recent developments and implications for market functioning”. Documento de Trabajo 0120, Banco de España.
Bolton, P. and O. Jeanne (2011). “Sovereign default risk and bank fragility in financially integrated econo-mies”. Discussion Paper 8368, Centre for Economic Policy Research.
Broner, Fernando,and Jaume Ventura (2011). “Globalization and Risk Sharing”. Review of Economic Stud-ies, Vol. 78, pp. 49-82.
Carrión-i-Silvestre, J. L., Sansó-i-Roselló, A. and Ortuño, M. A. (2001). “Unit root and stationarity tests’ wedding”. Economics Letters, Vol. 70, pp. 1–8.
De Santis R.A. and B. Gérard (2006). “Financial Integration, International Portfolio Choice and the Europe-an Monetary Union”. Working Paper 626, European Central Bank.
Dolado, J. J., Jenkinson, T. and Sosvilla-Rivero, S. (1990): “Cointegration and Unit Roots”. Journal of Eco-nomic Surveys, Vol. 4, pp. 149-173.
Dornbusch, R., Park, Y. C., & Claessens, S. (2000). “Contagion: Understanding how it spreads”. The World Bank research observer, Vol. 15, pp. 177-198.
Ejsing, J. and W. Lemke (2009). “The Janus-headed salvation: sovereign and bank credit risk premia during 2008-09”. Working Paper 1127, European Central Bank.
Forbes, K., & Rigobon, R. (2002). “No contagion, only interdependence: Measuring stock market comove-ments”. Journal of Finance, Vol. 57, pp. 2223-2261.
Gennaioli, N.; A. Martin and S. Rossi (2011). “Sovereign Default, Domestic Banks and Financial Institu-tions”. NBER Meetings in International Finance and Macroeconomics.
Gómez-Puig, M. (2006). “Size Matters for Liquidity: Evidence from EMU Sovereign Yield Spreads”, Econom-ics Letters, Vol. 90, pp. 156-162.
Gómez-Puig, M. (2008). “Monetary Integration and the Cost of Borrowing”, Journal of International Money and Finance, Vol. 27, pp. 455-479.
Gómez-Puig M. (2009a). “The Immediate Effect of Monetary Union over UE-15’s Sovereign Debt Yield Spreads”, Applied Economics, Vol. 41, pp. 929-939.
Gómez-Puig, M. (2009b) “Systemic and Idiosyncratic Risk in UE-15 Sovereign Yield Spreads After Seven Years of Monetary Union”, European Financial Management, Vol. 15, pp. 971–1000.
Granger, C. W. J. (1969) “Investigating Causal Relations by Econometric Models and Cross-spectral Meth-ods”, Econometrica, Vol. 37, pp. 24-36.
Gray, D. F. (2009). “Modeling Financial Crises and Sovereign Risks,” Annual Review of Financial Econo-mics, Vol. 1, pp.117–144.
Gros, D. (2011). “External versus domestic debt in the euro crisis”. Policy Brief 243, Centre for European Policy Studies.
Gros, D. and T. Mayer (2011). “Debt reduction without default?”. Policy Brief 233, Centre for European Policy Studies.
Hsiao, C. (1981). “Autoregressive Modelling and Money-income Causality Detection”, Journal of Monetary Economics, Vol. 7, pp. 85–106.
International Monetary Fund (2010). “Global Financial Stability Report”, April.
Johansen, S. (1991): “Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Auto-regressive Models”, Econometrica, Vol. 59, pp. 1551-1580.
Johansen, S. (1994): “The Role of the Constant and Linear Terms in Cointegration Analysis of Nonstationary Variables”, Econometric Reviews, Vol. 13, pp. 205-229.
Johansen, S. (1995): Likelihood-based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.
Kalemi-Ozcan, S.; E. Papaioannou and J.-L. Peydró-Alcalde (2010): “What Lies Beneath the Euro’s Effect on Financial Integration? Currency Risk, Legal Harmonization, or Trade? Journal of International Economics, Vol. 81, pp. 75-88.
Lane, P.R. (2011). “The Irish Crisis”. Discussion Paper 8287, Centre for Economic Policy Research.
MacKinnon, J. G., Haug, A. A. and Michelis, L. (1999): “Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration”, Journal of Applied Econometrics, Vol.14, pp. 563-577.
Mody, A. (2009). “From Bear Sterns to Anglo Irish: How Eurozone sovereign spreads related to financial sector vulnerability”. Working Paper 09/108, International Monetary Fund.
Nielsen, B. and Rahbek, A. (2000). Similarity Issues in Cointegration Analysis”. Oxford Bulletin of Econo-mics and Statistics, Vol. 62, pp. 5-22.
Sosvilla-Rivero, S. and Morales-Zumaquero, A. (2011): “Volatility in EMU Sovereign Bond Yields: Permanent and Transitory Components”, Documentos de Economía y Finanzas Internacionales 11-03, Asociación Es-pañola de Economía y Finanzas Internacionales.
Spiegel, M (2009a). “Monetary and Financial Integration in the EMU: Push or Pull?”. Review of Interna-tional Economics, Vol. 17, pp. 751-776.
Spiegel, M (2009b). “Monetary and Financial Integration: Evidence from the EMU”. Journal of the Japanese and International Economies, Vol. 23, pp. 114-130.
Thornton, D. L., and Batten, D. S. (1985). “Lag-length Selection and Tests of Granger Causality between Money and Income”, Journal of Money, Credit, and Banking, Vol. 27, pp. 164-178.
Williams, E.J. (1959): Regression analysis, Wiley, New York.