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Spillover in Euro Area Sovereign Bond Markets


  • Thomas Conefrey

    (Irish Fiscal Advisory Council)

  • David Cronin

    (Central Bank of Ireland)


This paper applies the Diebold and Yilmaz (2009, 2012) spillover methodology to euro area sovereign bond markets. Our analysis identifies different phases of interaction in those markets in recent years. We find a substantial increase in spillover between euro area sovereign bond markets coinciding with the bailout of Bear Stearns in March 2008. The phase of the euro area crisis from the first Greece bailout in May 2010 until the end of 2011 saw a reversal of the longstanding pattern whereby events in core euro area member state sovereign bond markets exercised a positive net influence on the periphery. In particular, the first Greece bailout coincided with significant positive net spillover from peripheral member states to the core countries. More recently, improved market conditions have seen the pre-2008 pattern re-established with the core having a stronger net impact on peripheral euro area sovereign bond markets. The analysis points to Greece having become relatively detached from other bond markets since its second bailout in March 2012. The spillover index and its components can be updated on an ongoing basis as new data become available and can provide useful information to policymakers and analysts alike.

Suggested Citation

  • Thomas Conefrey & David Cronin, 2015. "Spillover in Euro Area Sovereign Bond Markets," The Economic and Social Review, Economic and Social Studies, vol. 46(2), pages 197-231.
  • Handle: RePEc:eso:journl:v:46:y:2015:i:2:p:197-231

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    References listed on IDEAS

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    Cited by:

    1. Afees A. Salisu & Taofeek O. Ayinde, 2018. "Testing for spillovers in naira exchange rates: The role of electioneering & global financial crisis," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 18(4), pages 341-348, December.
    2. Cronin, David & Dunne, Peter & McQuinn, Kieran, 2019. "Have Irish sovereign bonds decoupled from the euro area periphery, and why?," Papers WP625, Economic and Social Research Institute (ESRI).
    3. Cronin, David & Dunne, Peter G., 2019. "How effective are sovereign bond-backed securities as a spillover prevention device?," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 49-66.
    4. Cronin, David & Flavin, Thomas J. & Sheenan, Lisa, 2016. "Contagion in Eurozone sovereign bond markets? The good, the bad and the ugly," Economics Letters, Elsevier, vol. 143(C), pages 5-8.
    5. Onofrio Panzarino & Francesco Potente & Alfonso Puorro, 2016. "BTP futures and cash relationships: a high frequency data analysis," Temi di discussione (Economic working papers) 1083, Bank of Italy, Economic Research and International Relations Area.
    6. António Afonso & Mina Kazemi, 2018. "Sovereign Bond Yields Spreads Spillovers in the EMU," Working Papers REM 2018/52, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    7. Adegbemi Babatunde Onakoya & Adedotun Victor Seyingbo, 2017. "Financial Markets Integration: Appraising the Developed and Emerging Markets Nexus," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 613-624.
    8. Moloney, Kitty & Killeen, Neill & Gilvarry, Oliver, 2014. "A Fragmentation Indicator for Euro Area Sovereign Bond Markets," Economic Letters 11/EL/14, Central Bank of Ireland.

    More about this item


    eurozone; sovereign bond markets;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H6 - Public Economics - - National Budget, Deficit, and Debt


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