Measuring Sovereign Contagion in Europe

SAFE Working Paper No. 103

92 Pages Posted: 15 May 2015

See all articles by Massimiliano Caporin

Massimiliano Caporin

University of Padua - Department of Statistical Sciences

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE; Ca Foscari University of Venice - Dipartimento di Economia

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management; BI Norwegian Business School - Department of Data Science and Analytics

Roberto Rigobon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: April 2015

Abstract

This paper analyzes sovereign risk shift-contagion, i.e. positive and significant changes in the propagation mechanisms, using bond yield spreads for the major eurozone countries. By emphasizing the use of two econometric approaches based on quantile regressions (standard quantile regression and Bayesian quantile regression with heteroskedasticity) we find that the propagation of shocks in euro's bond yield spreads shows almost no presence of shift-contagion. All the increases in correlation we have witnessed over the last years come from larger shocks propagated with higher intensity across Europe.

Keywords: Sovereign Risk, Contagion, Disintegration

JEL Classification: E58, F34, F36, G12, G15

Suggested Citation

Caporin, Massimiliano and Pelizzon, Loriana and Ravazzolo, Francesco and Rigobon, Roberto, Measuring Sovereign Contagion in Europe (April 2015). SAFE Working Paper No. 103, Available at SSRN: https://ssrn.com/abstract=2606508 or http://dx.doi.org/10.2139/ssrn.2606508

Massimiliano Caporin

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

Loriana Pelizzon (Contact Author)

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

BI Norwegian Business School - Department of Data Science and Analytics ( email )

Nydalsveien 37
Oslo, 0484
Norway

Roberto Rigobon

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E52-447
Cambridge, MA 02142
United States
617-258-8374 (Phone)
617-258-6855 (Fax)

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