The Dynamics of Contagion and Behavior of the Euro Area Sovereign Bond Markets

Oussama Kchaou, Salim Ben Sassi, M. Bellalah
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Abstract

We investigate the contagion dynamics in the main Economic and Monetary Union sovereign bond markets during the subprime and euro crises. To this end, we adopt the APARCH-ADCC model and the Markov Switching Dynamic Regression model. The impact of both crises on each country in our sample is investigated using two crisis indicators: synchronization and intensity. The empirical results show that contagious episodes and their intensities vary over time and across market pairs for both crises, thus illustrating the complexity of this phenomenon. They also reveal that the market couples composed of the Economic and Monetary Union peripheral countries were immune to the contagion of the subprime crisis and that its third phase was the most violent in terms of the intensity of the transmission of shocks. Moreover, the results show that all the countries in our sample were affected by contagion from the euro crisis, at least during one of its sub-phases. Furthermore, before the first rescue plan for the Hellenic economy, our methodology detected a contagion effect stemming from Italy, Spain, and Portugal, while intuitively one could have imagined this phenomenon coming solely from the Greek sovereign market. Finally, the analysis of the synchronization and intensity variables provides evidence of a « multi-speed Economic and Monetary Union », refuting the notion of uniform integration of the euro area sovereign bond markets. We believe that it is necessary to complete the institutional architecture of the Economic and Monetary Union to make it more resilient to shocks.
欧元区主权债券市场的传染动态和行为
在次贷危机和欧元危机期间,我们研究了主要经济和货币联盟主权债券市场的传染动态。为此,我们采用了APARCH-ADCC模型和马尔可夫切换动态回归模型。在我们的样本中,这两个危机对每个国家的影响是用两个危机指标来调查的:同步性和强度。实证结果表明,两次危机的传染事件及其强度随时间和市场对而变化,从而说明了这一现象的复杂性。它们还揭示了由经济和货币联盟外围国家组成的市场夫妇对次贷危机的蔓延免疫,并且就冲击传播的强度而言,其第三阶段是最猛烈的。此外,结果表明,我们样本中的所有国家都受到欧元危机蔓延的影响,至少在其一个子阶段。此外,在希腊经济的第一个救助计划出台之前,我们的方法发现了来自意大利、西班牙和葡萄牙的传染效应,而直觉上,人们可能会认为这种现象只来自希腊主权市场。最后,对同步和强度变量的分析提供了“多速度经济和货币联盟”的证据,驳斥了欧元区主权债券市场统一一体化的概念。我们认为,有必要完善经济与货币联盟的制度架构,使其更能抵御冲击。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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