A dynamic factor model with time-varying loadings for euro area bond markets during the debt crisis
AbstractThe debt crisis in the euro area led to obvious changes in the structure of euro area bond markets. To model the process of disintegration that has taken place as a result of this crisis, this analysis uses a dynamic factor model with time-varying loadings and two factors. While some core countries load rather stably on one factor, this factor loses its impact on many peripheral countries over time. At least for some periods, countries that are affected by the debt crisis load highly on a second factor, especially Spain and Italy. Ireland, Portugal, and Greece, which all load highly on the second factor for some periods, show signs of decoupling at the current edge.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 118 (2013)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/ecolet
Bond markets; Euro crisis; Dynamic factor models; Time-varying loadings; Bayesian estimation;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
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