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“How systemic is Spain for Europe?”

Author

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  • Peter Claeys

    () (Faculty of Economics, University of Barcelona)

  • Borek Vašícek

    () (Czech Czech National Bank, Economic Research Department)

Abstract

We use the forecast-error variance decompositions from a VAR with daily sovereign bonds spreads since 2000 to detail the linkages between EU sovereign bond markets and banks over time. Using new summary statistics on the matrix of bilateral linkages, we show Spain is systemic for Europe. Its fiscal problems expose it to trouble in sovereign bond markets of the other Club Med countries, whereas its internationally grown banking sector transmits domestic economic trouble to the rest of Europe. This spillover has substantially increased since the outbreak of the Fiscal Crisis in the Eurozone in May 2010. We develop a real-time indicator to follow the degree of spillover on a daily basis.

Suggested Citation

  • Peter Claeys & Borek Vašícek, 2013. "“How systemic is Spain for Europe?”," AQR Working Papers 201301, University of Barcelona, Regional Quantitative Analysis Group, revised Feb 2013.
  • Handle: RePEc:aqr:wpaper:201301
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    References listed on IDEAS

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    Cited by:

    1. Michał Adam, 2013. "Spillovers and contagion in the sovereign CDS market," Bank i Kredyt, Narodowy Bank Polski, vol. 44(6), pages 571-604.

    More about this item

    Keywords

    spillover; contagion; sovereign bond spreads; fiscal policy; Eurozone; financial crisis; sovereign ratings.. JEL classification: G12; C14; E43; E62; G12; H62; H63;

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