Volatility-Spillover Effects in European Bond Markets
University of Aarhus - School of Economics and Management - CREATES
November 18, 2005
We analyze volatility spillover from the US and aggregate European bond markets into individual European bond markets using a GARCH volatility-spillover model. We find strong statistical evidence of volatility spillover from the US and aggregate European bon markets. For the EMU countries, the US volatility-spillover effects are rather weak (in economic terms) whereas the European volatility-spillover effects are strong. The bond markets of the EMU countries have become much more integrated after the introduction of the euro and in recent years, they have become close to being perfectly integrated. The main driver of the integration appears to be convergence in interest rates.
Number of Pages in PDF File: 51
Keywords: Euro Introduction, Government Bonds, Integration of Bond Markets, International Bond Markets, Volatility Spillover
JEL Classification: C32, E43, F36, G12, G15working papers series
Date posted: September 15, 2003
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