Debt Contagion in Europe: A Panel-Vector Autoregressive (VAR) Analysis
AbstractThe European sovereign-debt crisis began in Greece when the government announced in December, 2009, that its debt reached 121% of GDP (or 300 billion euros) and its 2009 budget deficit was 12.7% of GDP, four times the level allowed by the Maastricht Treaty. The Greek crisis soon spread to other Economic and Monetary Union (EMU) countries, notably Ireland, Portugal, Spain and Italy. Using quarterly data for the 2000–2011 period, we implement a panel-vector autoregressive (PVAR) model for 11 EMU countries to examine the extent to which a rise in a country’s bond-yield spread or debt-to-GDP ratio affects another EMU countries’ fiscal and macroeconomic outcomes. To distinguish between interdependence and contagion among EMU countries, we compare results obtained for the pre-crisis period (2000–2007) with the crisis period (2008–2011) and control for global risk aversion.
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Bibliographic InfoArticle provided by MDPI, Open Access Journal in its journal Social Sciences.
Volume (Year): 2 (2013)
Issue (Month): 4 (December)
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Panel VAR; sovereign debt crisis; euro area; contagion;
Find related papers by JEL classification:
- A - General Economics and Teaching
- B - Schools of Economic Thought and Methodology
- N - Economic History
- P - Economic Systems
- Y80 - Miscellaneous Categories - - Related Disciplines - - - Related Disciplines
- Z00 - Other Special Topics - - General - - - General
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