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The Contagion of the Greek Debt Crisis on the EMU Sovereign Bond Markets: A Garch-DCC Approach

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  • Oussama Kchaou

    (CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne)

  • Makram Bellalah

    (CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne)

Abstract

We use the dynamic conditional correlation (DCC) model of Engle (2002) to examine the contagion effects from the Greek debt crisis on seven Economic and Monetary Union (EMU) sovereign bond markets. Following this purpose, daily data on ten-year sovereign bond yields for each market were collected for a period ranging from 1 September 2009 to 31 December 2015. We show a strong evidence of contagion effects from the Greek sovereign bond market to those of the other peripheral countries during the spring of 2010 suggesting a \guillemotleft wake-up call contagion\guillemotright phenomenon. Except for this period, the DCC return series strongly reject the hypothesis of contagion stemming from the ten-year Greek government bond to our seven sovereign debt markets. We thus argue that over time, investors became more confident that the Greek debt crisis was a special case independent from the other countries. Our results are very important for policymakers and investors. \textcopyright 2020 Inderscience Enterprises Ltd.

Suggested Citation

  • Oussama Kchaou & Makram Bellalah, 2020. "The Contagion of the Greek Debt Crisis on the EMU Sovereign Bond Markets: A Garch-DCC Approach," Post-Print hal-03680581, HAL.
    • Handle: RePEc:hal:journl:hal-03680581
    DOI: 10.1504/ijesb.2020.104246
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    Cited by:

    1. Oussama Kchaou & Makram Bellalah & Sofiane Tahi, 2022. "Transmission of the Greek crisis on the sovereign debt markets in the euro area," Annals of Operations Research, Springer, vol. 313(2), pages 1117-1139, June.

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