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“How systemic is Spain for Europe?”

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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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    3. Jaume Belles-Sampera & Montserrat Guillén & José M. Merigó & Miguel Santolino, 2013. "“Indicators for the characterization of discrete Choquet integrals”," IREA Working Papers 201311, University of Barcelona, Research Institute of Applied Economics, revised May 2013.
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    6. Michał Adam, 2013. "Spillovers and contagion in the sovereign CDS market," Bank i Kredyt, Narodowy Bank Polski, vol. 44(6), pages 571-604.
    7. Manuela Alcañiz & Montserrat Guillén & Daniel Sánchez-Moscona & Miguel Santolino & Oscar Llatje & Lluís Ramon, 2013. "Prevalence of alcohol-impaired drivers based on random breath tests in a roadside survey," Working Papers XREAP2013-05, Xarxa de Referència en Economia Aplicada (XREAP), revised Jul 2013.

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    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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