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Causality and contagion in EMU sovereign debt markets

Author

Listed:
  • Marta Gómez-Puig

    (Department of Economic Theory, Riskcenter-IREA, Universitat de Barcelona)

  • Simón Sosvilla-Rivero

    (Department of Quantitative Economics, Universidad Complutense de Madrid)

Abstract
This paper contributes to the literature by applying the Granger-causality approach and endogenous breakpoint test to offer an operational definition of contagion to examine European Economic and Monetary Union (EMU) countries public debt behaviour. A database of yields on 10-year government bonds issued by 11 EMU countries covering fourteen years of monetary union is used. The main results suggest that the 41 new causality patterns, which appeared for the first time in the crisis period, and the intensification of causality recorded in 70% of the cases, provide clear evidence of contagion in the aftermath of the current euro debt crisis.

Suggested Citation

  • Marta Gómez-Puig & Simón Sosvilla-Rivero, 2014. "Causality and contagion in EMU sovereign debt markets," Working Papers 2014-03, Universitat de Barcelona, UB Riskcenter.
    • Handle: RePEc:bak:wpaper:201403
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    More about this item

    Keywords

    Sovereign bond yields; Granger causality; contagion; Euro area;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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