IDEAS home Printed from https://ideas.repec.org/p/ira/wpaper/201424.html
   My bibliography  Save this paper

“European government bond market integration in turbulent times”

Author

Listed:
  • Pilar Abad

    () (Faculty of Economics, University of Barcelona)

  • Helena Chuliá

    () (Faculty of Economics, University of Barcelona)

Abstract

In this paper we investigate the dynamics of European government bond market integration during the financial crisis and, subsequently, during the European sovereign debt crisis. Based on the approach developed by Bae et al. (2003), we adopt an intuitive measure of integration: the higher the number of joint extreme price rises or falls (coexceedances), the higher the degree of integration. We also analyse the underlying determinants of the dynamics of integration using a binomial logistic regression. Our results reveal that the level of integration of European government bond markets with the euro area has changed over time, with notable differences between the financial and the European sovereign debt crises. We find that the Euribor, unexpected monetary policy announcements from the ECB and both regional and international volatility play an important role in determining the level of integration, and that, in general, the relevance of these factors does not change between the financial and the sovreign debt crises.

Suggested Citation

  • Pilar Abad & Helena Chuliá, 2014. "“European government bond market integration in turbulent times”," IREA Working Papers 201424, University of Barcelona, Research Institute of Applied Economics, revised Oct 2014.
    • Handle: RePEc:ira:wpaper:201424
    as

    Download full text from publisher

    File URL: http://www.ub.edu/irea/working_papers/2014/201424.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ben S. Bernanke & Kenneth N. Kuttner, 2005. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," Journal of Finance, American Finance Association, vol. 60(3), pages 1221-1257, June.
    2. Ricardo J. Caballero & Arvind Krishnamurthy, 2008. "Collective Risk Management in a Flight to Quality Episode," Journal of Finance, American Finance Association, vol. 63(5), pages 2195-2230, October.
    3. Kim, Suk-Joong & Lucey, Brian M. & Wu, Eliza, 2006. "Dynamics of bond market integration between established and accession European Union countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(1), pages 41-56, February.
    4. Michael Ehrmann & Marcel Fratzscher & Refet S Güürkaynak & Eric T Swanson, 2011. "Convergence and Anchoring of Yield Curves in the Euro Area," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 350-364, February.
    5. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June.
    6. Don Bredin & Stuart Hyde & Dirk Nitzsche & Gerard O'Reilly, 2009. "European monetary policy surprises: the aggregate and sectoral stock market response," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 156-171.
    7. Marco Pagano, 2004. "The European Bond Markets under EMU," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 531-554, Winter.
    8. Pilar Abad & Helena Chuliá & Marta Gómez†Puig, 2014. "Time†varying Integration in European Government Bond Markets," European Financial Management, European Financial Management Association, vol. 20(2), pages 270-290, March.
    9. Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2009. "Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market," Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 925-957.
    10. Eloísa Ortega & Juan Peñalosa, 2012. "The Spanish economic crisis: key factors and growth challenges in the euro area," Occasional Papers 1201, Banco de España;Occasional Papers Homepage.
    11. Kee-Hong Bae & G. Andrew Karolyi & René M. Stulz, 2003. "A New Approach to Measuring Financial Contagion," Review of Financial Studies, Society for Financial Studies, vol. 16(3), pages 717-763, July.
    12. Abad, Pilar & Chuliá, Helena & Gómez-Puig, Marta, 2010. "EMU and European government bond market integration," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 2851-2860, December.
    13. Alois Geyer & Stephan Kossmeier & Stefan Pichler, 2004. "Measuring Systematic Risk in EMU Government Yield Spreads," Review of Finance, Springer, vol. 8(2), pages 171-197.
    14. Cappiello, Lorenzo & Gérard, Bruno & Kadareja, Arjan & Manganelli, Simone, 2006. "Financial integration of new EU Member States," Working Paper Series 683, European Central Bank.
    15. Pozzi, Lorenzo & Wolswijk, Guido, 2012. "The time-varying integration of euro area government bond markets," European Economic Review, Elsevier, vol. 56(1), pages 36-53.
    16. repec:oup:ecpoli:v:24:y:2009:i::p:191-240 is not listed on IDEAS
    17. Pilar Abad & Helena Chuliá, 2013. "“European Government Bond Markets and Monetary Policy Surprises: Returns, Volatility and Integration”," IREA Working Papers 201325, University of Barcelona, Research Institute of Applied Economics, revised Dec 2013.
    18. Christiansen, Charlotte & Ranaldo, Angelo, 2009. "Extreme coexceedances in new EU member states' stock markets," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1048-1057, June.
    19. Kerstin Bernoth & Jürgen von Hagen, 2004. "The Euribor Futures Market: Efficiency and the Impact of ECB Policy Announcements," International Finance, Wiley Blackwell, vol. 7(1), pages 1-24, March.
    20. Christiansen, Charlotte, 2014. "Integration of European bond markets," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 191-198.
    21. Charlotte Christiansen, 2007. "Volatility‐Spillover Effects in European Bond Markets," European Financial Management, European Financial Management Association, vol. 13(5), pages 923-948, November.
    22. Baur, Dirk & Schulze, Niels, 2005. "Coexceedances in financial markets--a quantile regression analysis of contagion," Emerging Markets Review, Elsevier, vol. 6(1), pages 21-43, April.
    23. Vance L. Martin & Mardi Dungey, 2007. "Unravelling financial market linkages during crises," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 89-119.
    24. Bomfim, Antulio N., 2003. "Pre-announcement effects, news effects, and volatility: Monetary policy and the stock market," Journal of Banking & Finance, Elsevier, vol. 27(1), pages 133-151, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wohlmann, Monika, 2015. "Finanzmarktintegration in Mittelosteuropa: Eine empirische Analyse der integrativen Wirkung des Euro," Arbeitspapiere der FOM 55, FOM Hochschule für Oekonomie & Management.
    2. Mercedes Ayuso & Montserrat Guillen & Jens Perch Nielsen, 2019. "Improving automobile insurance ratemaking using telematics: incorporating mileage and driver behaviour data," Transportation, Springer, vol. 46(3), pages 735-752, June.
    3. Sanjay Sehgal & Piyush Pandey & Florent Deisting, 2018. "Stock Market Integration Dynamics and its Determinants in the East Asian Economic Community Region," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(2), pages 389-425, June.
    4. Manuela Alcañiz & Aïda Solé-Auró, 2018. "Ageing and health-related quality of life: evidence from Catalonia (Spain)," Working Papers 2018-01, Universitat de Barcelona, UB Riskcenter.
    5. Estefanía Alaminos & Mercedes Ayuso, 2015. "Methodological Approach of a Multiple State Actuarial Model for the Married - Widower case for the assessment of retirement and widowhood pensions," Working Papers 2015-04, Universitat de Barcelona, UB Riskcenter.

    More about this item

    Keywords

    Financial integration; European government bond markets; coexceedances; extreme returns; logistic regression. JEL classification: C25; F36; G15;

    JEL classification:

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ira:wpaper:201424. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alicia García). General contact details of provider: http://edirc.repec.org/data/feubaes.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.