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Download or read book Measuring Sovereign Contagion in Europe written by and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Massimiliano Caporin
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (129 download)
Download or read book Measuring Sovereign Contagion in Europe written by Massimiliano Caporin and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the sovereign risk contagion using credit default swaps (CDS) and bond premiums for the major eurozone countries. By emphasizing several econometric approaches (nonlinear regression, quantile regression and Bayesian quantile regression with heteroskedasticity) we show that propagation of shocks in Europe's CDS has been remarkably constant for the period 2008-2011 even though a significant part of the sample periphery countries have been extremely affected by their sovereign debt and fiscal situations. Thus, the integration among the different eurozone countries is stable, and the risk spillover among these countries is not affected by the size of the shock, implying that so far contagion has remained subdue. Results for the CDS sample are confirmed by examining bond spreads. However, the analysis of bond data shows that there is a change in the intensity of the propagation of shocks in the 2003-2006 pre-crisis period and the 2008-2011 post-Lehman one, but the coefficients actually go down, not up! All the increases in correlation we have witnessed over the last years come from larger shocks and the heteroskedasticity in the data, not from similar shocks propagated with higher intensity across Europe. This is the first paper, to our knowledge, where a Bayesian quantile regression approach is used to measure contagion. This methodology is particularly well-suited to deal with nonlinear and unstable transmission mechanisms -- National Bureau of Economic Research web site.
Author : Massimiliano Caporin
Publisher :
ISBN 13 :
Total Pages : 57 pages
Book Rating : 4.:/5 (793 download)
Download or read book Measuring Sovereign Contagion in Europe written by Massimiliano Caporin and published by . This book was released on 2012 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the sovereign risk contagion using credit default swaps (CDS) and bond premiums for the major eurozone countries. By emphasizing several econometric approaches (nonlinear regression, quantile regression and Bayesian quantile regression with heteroskedasticity) we show that propagation of shocks in Europe's CDS has been remarkably constant for the period 2008-2011 even though a significant part of the sample periphery countries have been extremely affected by their sovereign debt and fiscal situations. Thus, the integration among the different eurozone countries is stable, and the risk spillover among these countries is not affected by the size of the shock, implying that so far contagion has remained subdue. Results for the CDS sample are confirmed by examining bond spreads. However, the analysis of bond data shows that there is a change in the intensity of the propagation of shocks in the 2003-2006 pre-crisis period and the 2008-2011 post-Lehman one, but the coefficients actually go down, not up! All the increases in correlation we have witnessed over the last years come from larger shocks and the heteroskedasticity in the data, not from similar shocks propagated with higher intensity across Europe. This is the first paper, to our knowledge, where a Bayesian quantile regression approach is used to measure contagion. This methodology is particularly well-suited to deal with nonlinear and unstable transmission mechanisms.
Author : Charles Mathias
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (93 download)
Download or read book Measuring Contagion in the European Sovereign Bond Market written by Charles Mathias and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Peter Claeys
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (891 download)
Download or read book Measuring Bilateral Spillover and Testing Contagion on Sovereign Bond Markets in Europe written by Peter Claeys and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Peter Claeys
Publisher :
ISBN 13 :
Total Pages : 45 pages
Book Rating : 4.:/5 (13 download)
Download or read book Measuring Bilateral Spillover and Testing Contagion on Sovereign Bond Markets in Europe written by Peter Claeys and published by . This book was released on 2016 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global financial crisis rapidly spread across borders and financial markets, and also distressed EU bond markets. The crisis did not hit all markets in the same way. We measure the strength and direction of linkages between 16 EU sovereign bond markets using a factor-augmented version of the VAR model in Diebold and Yilmaz (2009). We then provide a novel test for contagion by applying the multivariate structural break test of Qu and Perron (2007) on this FAVAR detecting significant sudden changes in shock transmission. Results indicate substantial spillover, especially between EMU countries, with Belgium, Italy and Spain being key markets during the financial crisis. Contagion has been a rather rare phenomenon limited to a few well defined moments of uncertainty on financial assistance packages for Greece, Ireland and Portugal. Most of the frequent surges in market co-movement are driven by larger shocks rather than by contagion.
Author : Mr.Giovanni Dell'Ariccia
Publisher : International Monetary Fund
ISBN 13 : 1484359623
Total Pages : 54 pages
Book Rating : 4.4/5 (843 download)
Download or read book Managing the Sovereign-Bank Nexus written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2018-09-07 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
Author : Brent Glover
Publisher :
ISBN 13 :
Total Pages : 47 pages
Book Rating : 4.:/5 (893 download)
Download or read book Contagion in the European Sovereign Debt Crisis written by Brent Glover and published by . This book was released on 2014 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a network model of credit risk to measure market expectations of the potential spillovers from a sovereign default. Specifically, we develop an empirical model, based on the recent theoretical literature on contagion in financial networks, and estimate it with data on sovereign credit default swap spreads and the detailed structure of financial linkages among thirteen European sovereigns from 2005 to 2011. Simulations from the estimated model show that a sovereign default generates only small spillovers to other sovereigns. These results imply that credit markets do not demand a significant premium for the interconnectedness of sovereign debt in Europe.
Author :
Publisher :
ISBN 13 : 9789289910743
Total Pages : 43 pages
Book Rating : 4.9/5 (17 download)
Download or read book Measuring Bilateral Spillover and Testing Contagion on Sovereign Bond Markets in Europe written by and published by . This book was released on 2014 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global financial crisis rapidly spread across borders and financial markets, and also distressed EU bond markets. The crisis did not hit all markets in the same way. We measure the strength and direction of linkages between 16 EU sovereign bond markets using a factor-augmented version of the VAR model in Diebold and Yilmaz (2009). We then provide a novel test for contagion by applying the multivariate structural break test of Qu and Perron (2007) on this FAVAR detecting significant sudden changes in shock transmission. Results indicate substantial spillover, especially between EMU countries. Differences in bilateral linkages are due to a combination of fiscal trouble and a large banking sector, as Belgium, Italy and Spain are central to shock transmission during the financial crisis. Contagion has been a rather rare phenomenon limited to a few well defined moments of uncertainty on financial assistance packages for Greece, Ireland and Portugal. Most of the frequent surges in market co-movement are driven by larger shocks rather than by contagion.
Author : Ms.Brenda Gonzalez-Hermosillo
Publisher : International Monetary Fund
ISBN 13 : 1484368347
Total Pages : 28 pages
Book Rating : 4.4/5 (843 download)
Download or read book Transmission of Financial Stress in Europe written by Ms.Brenda Gonzalez-Hermosillo and published by International Monetary Fund. This book was released on 2014-05-02 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes a stochastic volatility model to measure sovereign financial distress. It examines how key European sovereign credit default swap (CDS) spreads affect each other; specifically, the paper analyses the volatility structure of Germany, Greece, Ireland, Italy, Spain and Portugal. The stability of Germany is a close proxy for the resilience of the euro area as markets use Germany’s sovereign CDS as a hedge for systemic risk. Although most of the CDS changes for Germany during 2009–12 were due to idiosyncratic factors, market developments in Italy and Spain contributed significantly, likely due to their relative importance in the region. Changes in Greece’s sovereign CDS had no significant effect on Germany’s sovereign CDS despite initial widespread concerns about such linkages. Spain and Italy show a notable co-dependence in explaining each other’s volatility while Germany also plays an important role. It is found that extreme bad news led to persistent and nearly permanent effects on the stochastic volatility of European sovereign CDS spreads.
Author : Veni Arakelian
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (13 download)
Download or read book Sovereign Risk Zones in Europe During and After the Debt Crisis written by Veni Arakelian and published by . This book was released on 2018 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We employ a machine learning approach to build a European sovereign risk stratification using macroeconomic fundamentals and contagion measures, proxied by copula-based credit default swap (CDS) dependencies over the period 2008-2017, for France, Germany, Greece, Ireland, Italy, Portugal, and Spain. By adopting a recursive partitioning strategy we detect specific risk zones varying from safe to high risk based on key predictors, and we construct their specification by assigning specific risk thresholds. While key macroeconomic fundamentals such as Debt/GDP and the unemployment rate remained the same and maintained the same risk thresholds during (2008-2013) and after (2013-2017) the crisis, the CDS spreads contagion dropped significantly over the post-crisis years, lowering the corresponding risk thresholds. We estimate an impact on CDS spreads approximately of -150 basis points in the period 2013-2017 due to contagion mitigation.
Author : Vassilios G. Papavassiliou
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Financial Contagion During the European Sovereign Debt Crisis written by Vassilios G. Papavassiliou and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Contagion is an elusive concept and several definitions have been used in the literature. According to Forbes and Rigobon (2002) contagion is defined as a significant increase in cross-market linkages after a shock to one country. In this paper we provide a selective literature review on international financial contagion, placing special emphasis on the ongoing European sovereign debt crisis. In summary, empirical research has pointed toward the existence of contagion effects during periods of financial turmoil. The paper summarizes various policy measures and institutional reforms that would help regulators and policy makers to deal with the adverse effects of contagion.
Author : Christian Meine
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Time-Varying Dependence in Sovereign and Bank Credit Spreads written by Christian Meine and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows how a measure of bank-sovereign contagion can be extracted from CDS spreads using conditional Copula functions. I estimate the probability of a European bank to experience extreme upward co-movements in CDS spreads together with its home sovereign. Two main results are obtained. First, bank-sovereign contagion is shown to vary strongly over time and across countries. Contagion is higher when the sovereign suffers from poor public finances. Second, banks with higher exposures to their home sovereign disproportionately benefit from sovereign-bank contagion in that they exhibit significantly lower CDS spreads. The evidence is supportive of a private-to-public risk transfer.
Author : Phoebus Athanassiou
Publisher :
ISBN 13 : 9781032030555
Total Pages : pages
Book Rating : 4.0/5 (35 download)
Download or read book The European Sovereign Debt Crisis written by Phoebus Athanassiou and published by . This book was released on 2021-08 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Introduction -- The sovereign-banks Nexus : an economic analysis -- The European sovereign debt crisis as a source of case studies -- An economic analysis of policy options -- Closing the first channel of contagion from banks to sovereigns : Hitherto European actions and their critique -- Closing the second channel of contagion from sovereigns to banks : legal assessment of policy options.
Author : Mehmet Ziya Gorpe
Publisher : International Monetary Fund
ISBN 13 : 1498312071
Total Pages : 63 pages
Book Rating : 4.4/5 (983 download)
Download or read book CoMap: Mapping Contagion in the Euro Area Banking Sector written by Mehmet Ziya Gorpe and published by International Monetary Fund. This book was released on 2019-05-10 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a novel approach to investigate and model the network of euro area banks’ large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and systemic risk of the euro area banking system based on bilateral linkages. We develop a Contagion Mapping model fully calibrated with bank-level data to study the contagion potential of an exogenous shock via credit and funding risks. We find that tipping points shifting the euro area banking system from a less vulnerable state to a highly vulnerable state are a non-linear function of the combination of network structures and bank-specific characteristics.
Author : Anton Brender
Publisher :
ISBN 13 : 9789461383372
Total Pages : 0 pages
Book Rating : 4.3/5 (833 download)
Download or read book The Sovereign Debt Crisis written by Anton Brender and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The Sovereign Debt Crisis," 2012 edition, looked at how governments ran up substantial deficits in order to avert a worldwide depression and their subsequent attempts to rebalance their budgets. This updated edition concentrates on the delicate balancing act the economies of the United States, Japan, and the eurozone face between the present need to boost sluggish economic growth by providing sufficiently cheap, low-risk credit and the longer-term challenges of cutting massive debt and returning to a sustainable fiscal policy. The authors argue that many of the euro area economies, having noticeable difficulty paying their international debts, are in a sovereign debt crisis, while America and Japan are, for now, holding steady but in real danger of slipping into crisis. The book shows how the process has evolved in these three major developed economies and how their policy choices impact global financial markets.
Author : Bertrand Candelon
Publisher : International Monetary Fund
ISBN 13 : 1455225061
Total Pages : 30 pages
Book Rating : 4.4/5 (552 download)
Download or read book Sovereign Rating News and Financial Markets Spillovers written by Bertrand Candelon and published by International Monetary Fund. This book was released on 2011-03-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the spillover effects of sovereign rating news on European financial markets during the period 2007-2010. Our main finding is that sovereign rating downgrades have statistically and economically significant spillover effects both across countries and financial markets. The sign and magnitude of the spillover effects depend both on the type of announcements, the source country experiencing the downgrade and the rating agency from which the announcements originates. However, we also find evidence that downgrades to near speculative grade ratings for relatively large economies such as Greece have a systematic spillover effects across Euro zone countries. Rating-based triggers used in banking regulation, CDS contracts, and investment mandates may help explain these results.
