Contagion in the Euro Area Sovereign Bond Market
Abstract
:1. Introduction
2. Literature Review
3. Stylized Facts about the Eurozone Crisis
4. Model
5. Data
All Countries | Highly Exposed | Low Exposed | |
---|---|---|---|
Entire Sample | |||
Standard Deviation (%) | 13.31 | 23.6 | 3.02 |
Autocorrelation | 0.16 | 0.21 | 0.12 |
First Subsample | |||
Standard Deviation (%) | 0.54 | 0.62 | 0.45 |
Autocorrelation | –0.02 | –0.04 | –0.01 |
Second Sub-sample | |||
Standard Deviation (%) | 2.9 | 3.81 | 1.98 |
Autocorrelation | 0.22 | 0.29 | 0.15 |
Third Sub-sample | |||
Standard Deviation (%) | 11.66 | 19.54 | 3.77 |
Autocorrelation | 0.18 | 0.24 | 0.13 |
Fourth Sub-sample | |||
Standard Deviation (%) | 32.04 | 59.12 | 4.96 |
Autocorrelation | 0.12 | 0.16 | 0.08 |
Firth Sub-sample | |||
Standard Deviation (%) | 7.89 | 13.4 | 2.37 |
Autocorrelation | 0.12 | 0.2 | 0.03 |
6. Empirical Results
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
Entire | I | II | III | IV | V | |
Main | ||||||
Lag Yields Spread | 0.10 | 0.03 | 0.16 *** | 0.20 ** | 0.07 | 0.22 *** |
Risk | 0.00 | 0.00 | 0.00 | 0.00 | 0.01 | 0.00 |
TED Spread | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 * |
Market Capitalization | 0.00 | 0.00 | 0.00 | 0.00 | –0.01 | 0.00 |
Spatial ρ | 0.12 * | 0.50 *** | 0.61 *** | 0.41 *** | 0.02 | 0.44 *** |
Observations | 8800 | 915 | 1730 | 3760 | 860 | 1510 |
Number of Countries | 5 | 5 | 5 | 5 | 5 | 5 |
RSquare | 0.01 | 0.01 | 0.09 | 0.06 | 0.01 | 0.07 |
Pvalues LM-Test | 0.00 | 0.00 | 0.00 | 0.00 | 0.90 | 0.00 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
Entire | I | II | III | IV | V | |
Main | ||||||
Lag Yields Spread | 0.12 *** | 0.00 | –0.05 | 0.16 *** | 0.08 ** | 0.03 |
Risk | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 * |
TED Spread | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Market Capitalization | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Spatial ρ | 0.54 *** | 0.46 *** | 0.58 *** | 0.55 *** | 0.56 *** | 0.54 *** |
Observations | 8800 | 915 | 1730 | 3760 | 860 | 1510 |
Number of Countries | 5 | 5 | 5 | 5 | 5 | 5 |
RSquare | 0.03 | 0.01 | 0.01 | 0.05 | 0.02 | 0.01 |
Pvalues LM-Test | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
Entire | I | II | III | IV | V | |
Main | ||||||
Lag Yields Spread | 0.21 *** | –0.01 | 0.15 *** | 0.18 *** | 0.26 *** | 0.13 *** |
Risk | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
TED Spread | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 ** |
Market Capitalization | 0.00 * | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Spatial ρ | 0.43 *** | 0.39 *** | 0.57 *** | 0.47 *** | 0.28 *** | 0.50 *** |
Observations | 7040 | 732 | 1384 | 3008 | 688 | 1208 |
Number of Countries | 4 | 4 | 4 | 4 | 4 | 4 |
RSquare | 0.06 | 0.01 | 0.08 | 0.07 | 0.07 | 0.05 |
Pvalues LM-Test | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
Entire | I | II | III | IV | V | |
Main | ||||||
Lag Yields Spread | 0.10 | 0.03 | 0.16 *** | 0.20 ** | 0.07 | 0.22 *** |
Risk | 0.00 | 0.00 | 0.00 | 0.00 | 0.01 | 0.00 |
TED Spread | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 * |
Market Capitalization | 0.00 | 0.00 | 0.00 | 0.00 | –0.01 | 0.00 |
Spatial ρ | 0.12 * | 0.50 *** | 0.61 *** | 0.41 *** | 0.02 | 0.44 *** |
Observations | 17,600 | 1830 | 3460 | 7520 | 1720 | 3020 |
Number of Countries | 10 | 10 | 10 | 10 | 10 | 10 |
RSquare | 0.01 | 0.01 | 0.06 | 0.06 | 0.01 | 0.06 |
Pvalues LM-Test | 0.00 | 0.00 | 0.00 | 0.00 | 0.69 | 0.00 |
7. Conclusions
Acknowledgments
Conflicts of Interest
References
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- 6The authors assume that pricing of bonds was fundamental. However, on may argue that pricing was also driven by overconfidence.
- 7For a detailed analysis of the ECB unconventional monetary policy measures and the impact of the ECB announcements, see [23].
- 8For a detailed analysis of the issues concerning the EMU, see [24].
- 9The weight matrix will be standardized to guarantee a stationary spatial model and the main diagonal is set equal to zero.
- 10The author provides the calculations for the weight matrix on request.
- 11The author provides the results of the tests on request.
- 13Five country members of the EMU are excluded from the investigation. Luxembourg is excluded because the financial outstanding and the government debt are very small as well as all countries that joint in the Union in 2008 or after (Cyprus, Slovakia, Slovenia, Malta, Estonia and recently Latvia).
- 14The calculated Lagrangian Multiplier test is the extention to the pooled case of the cross-sectional test. For additional reference on this issue, see [29].
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Muratori, U. Contagion in the Euro Area Sovereign Bond Market. Soc. Sci. 2015, 4, 66-82. https://doi.org/10.3390/socsci4010066
Muratori U. Contagion in the Euro Area Sovereign Bond Market. Social Sciences. 2015; 4(1):66-82. https://doi.org/10.3390/socsci4010066
Chicago/Turabian StyleMuratori, Umberto. 2015. "Contagion in the Euro Area Sovereign Bond Market" Social Sciences 4, no. 1: 66-82. https://doi.org/10.3390/socsci4010066