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The PIIGS stock markets before and after the 2008 financial crisis: a dynamic cointegration and causality analysis


  • Andreas S. Chouliaras
  • Apostolos G. Christopoulos
  • Dimitris Kenourgios
  • Petros Kalantonis


This paper investigates whether cointegration and causality relationships exist among the stock markets of the Portugal, Italy, Ireland, Greece and Spain (PIIGS) countries during the period 2005 to 2011. To accomplish our objective, we divide the sample period into two sub-periods (1 February 2005 to 30 June 2008 and 1 July 2008 to 30 June 2011). Considering that the financial crisis, which initiated in the USA in 2007, expanded to the EU in mid-2008, we call the first period 'pre-crisis period' and the second 'crisis period'. We apply a battery of tests such as Johansen cointegration, Granger causality, Gregory and Hansen residuals cointegration with regime shifts, fully modified ordinary least squares, as well as a multivariate GARCH model. Conventional cointegration and vector error correction analysis show long and short-run dynamics among PIIGS markets, especially during the crisis period. Further analysis into a regime switching and GARCH framework confirms the existence of cointegrating relationships among these stock markets while there are volatility spillovers between Greece and the rest of the countries. The findings have important implications for portfolio diversification benefits and the systemic nature of the crisis within the PIIGS countries.

Suggested Citation

  • Andreas S. Chouliaras & Apostolos G. Christopoulos & Dimitris Kenourgios & Petros Kalantonis, 2012. "The PIIGS stock markets before and after the 2008 financial crisis: a dynamic cointegration and causality analysis," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 4(3), pages 232-249.
  • Handle: RePEc:ids:injbaf:v:4:y:2012:i:3:p:232-249

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    Cited by:

    1. Tiwari, Aviral Kumar & Mutascu, Mihai Ioan & Albulescu, Claudiu Tiberiu, 2016. "Continuous wavelet transform and rolling correlation of European stock markets," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 237-256.
    2. Apostolos G. Christopoulos & Spyros Papathanasiou & Petros Kalantonis & Andreas Chouliaras & Savvas Katsikides, 2014. "An Investigation of Cointegration and Casualty Relationships between the PIIGS’ Stock Markets," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 109-123.
    3. José Carlos Vides & Antonio A. Golpe & Jesús Iglesias, 2018. "How did the Sovereign debt crisis affect the Euro financial integration? A fractional cointegration approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(4), pages 685-706, November.
    4. Polanco-Martínez, J.M. & Fernández-Macho, J. & Neumann, M.B. & Faria, S.H., 2018. "A pre-crisis vs. crisis analysis of peripheral EU stock markets by means of wavelet transform and a nonlinear causality test," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 1211-1227.


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