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Causality and contagion in EMU sovereign debt markets

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  • 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.

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File URL: http://www.ub.edu/riskcenter/research/WP/UBriskcenterWP201403.pdf
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Bibliographic Info

Paper provided by Universitat de Barcelona, UB Riskcenter in its series Working Papers with number 2014-03.

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Length: 33 pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:bak:wpaper:201403

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Keywords: Sovereign bond yields; Granger causality; contagion; Euro area;

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