Measuring Sovereign Contagion in Europe
SAFE Working Paper No. 103
92 Pages Posted: 15 May 2015
Date Written: April 2015
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
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