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Financial stress transmission in EMU sovereign bond market volatility: A connectedness analysis

Listed author(s):
  • Fernando Fernández-Rodríguez

    ()

    (Department of Quantitative Methods in Economics - Universidad de Las Palmas de Gran Canaria)

  • Marta Gómez-Puig

    ()

    (Department of Economic Theory - Universitat de Barcelona)

  • Simón Sosvilla-Rivero

    ()

    (Department of Quantitative Economics, Universidad Complutense de Madrid)

This paper measures the connectedness in EMU sovereign market volatility between April 1999 and January 2014, in order to monitor stress transmission and to identify episodes of intensive spillovers from one country to the others. To this end, we first perform a static and dynamic analysis to measure the total volatility connectedness in the entire period (the system-wide approach) using a framework recently proposed by Diebold and Yılmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each country and apply panel model techniques to investigate its determinants. Finally, to gain further insights, we examine the timevarying behaviour of net pair-wise directional connectedness at different stages of the recent sovereign debt crisis.

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Paper provided by Asociación Española de Economía y Finanzas Internacionales in its series Working Papers with number 15-02.

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Length: 36 pages
Date of creation: Feb 2015
Handle: RePEc:aee:wpaper:1502
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