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Government bond market linkages within EMU: evidence from a multivariate Granger causality analysis

Author

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  • Iuliana Matei

    () (University of Paris 1 Pantheon Sorbonne)

Abstract

The paper investigates empirically and from a dynamic perspective the causality relationships between the different EMU's government bond markets. We focus on two main periods: the pre-crisis period (from November 2003 to September 2008), and the crisis period (from September 2008 to February 2013). Using a multivariate Granger causality approach, we find that the integration of government bond markets is week, and the number and the direction of causality change during the crisis. Furthermore, countries exhibit different paths of financial convergence with Germany that we consider to be virtually free of risk, especially during the crisis period. These findings have implications for investors in terms of the diversification of their portfolios, and for policymakers in terms of managing common monetary policy.

Suggested Citation

  • Iuliana Matei, 2013. "Government bond market linkages within EMU: evidence from a multivariate Granger causality analysis," Economics Bulletin, AccessEcon, vol. 33(3), pages 1885-1898.
  • Handle: RePEc:ebl:ecbull:eb-13-00124
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I3-P177.pdf
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    References listed on IDEAS

    as
    1. Charlotte Christiansen, 2007. "Volatility-Spillover Effects in European Bond Markets," European Financial Management, European Financial Management Association, vol. 13(5), pages 923-948.
    2. von Hagen, Jürgen & Schuknecht, Ludger & Wolswijk, Guido, 2011. "Government bond risk premiums in the EU revisited: The impact of the financial crisis," European Journal of Political Economy, Elsevier, vol. 27(1), pages 36-43, March.
    3. Yang, Jian, 2005. "International bond market linkages: a structural VAR analysis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(1), pages 39-54, January.
    4. Bessler, David A. & Yang, Jian, 2003. "The structure of interdependence in international stock markets," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 261-287, April.
    5. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    6. Simone Manganelli & Guido Wolswijk, 2009. "What drives spreads in the euro area government bond market?," Economic Policy, CEPR;CES;MSH, vol. 24, pages 191-240, April.
    7. Iuliana Matei & Angela Cheptea, 2013. "Sovereign bond spread drivers in the EU market in the aftermath of the global financial crisis," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00845660, HAL.
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    Citations

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    Cited by:

    1. Rudra P. Pradhan & Mak B. Arvin & Sara E. Bennett & Mahendhiran Nair & John H. Hall, 2016. "Bond Market Development, Economic Growth and Other Macroeconomic Determinants: Panel VAR Evidence," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 23(2), pages 175-201, June.
    2. Bayraci, Selcuk, 2015. "Return, shock and volatility co-movements between the bond markets of Turkey and developed countries," MPRA Paper 65758, University Library of Munich, Germany.

    More about this item

    Keywords

    Debt; government bond markets; euro zone crisis; multivariate Granger causality;

    JEL classification:

    • F3 - International Economics - - International Finance
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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