Comovement and disintegration of EU sovereign bond markets during the crisis

32 Pages Posted: 11 Jun 2015

See all articles by Lukas Vacha

Lukas Vacha

Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic; Charles University in Prague - Department of Economics

Filip Smolik

Charles University in Prague

Jaromir Baxa

Charles University in Prague - Institute of Economic Studies; Institute of Information Theory and Automation, Prague

Date Written: June 10, 2015

Abstract

In this paper, we show that the comovement of bond yields in the EU before and during the European sovereign debt crisis is frequency-dependent. Using frequency cohesion and wavelet coherence, we demonstrate that the comovement is concentrated mainly at low frequencies. The comovement decreased in the eurozone during the crisis but remained high among countries with national currencies. Within the eurozone, we document a complex heterogeneity in the comovement that spans well beyond the traditional division between the core and the periphery. Overall, our results provide more credibility to the eurozone fragility hypothesis rather than to those who consider the fundamental factors to be the main driving force of the crisis.

Keywords: European sovereign debt crisis, Eurozone crisis, co-movement, contagion, European bonds, sovereign bonds

JEL Classification: C32, C49, C58, H63

Suggested Citation

Vacha, Lukas and Smolik, Filip and Baxa, Jaromir, Comovement and disintegration of EU sovereign bond markets during the crisis (June 10, 2015). International Review of Economics & Finance, Vol. 64, 2019. Available at SSRN: https://ssrn.com/abstract=2616878 or http://dx.doi.org/10.2139/ssrn.2616878

Lukas Vacha (Contact Author)

Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic ( email )

Pod vodarenskou vezi 4
Praha, CZ-18208
Czech Republic

Charles University in Prague - Department of Economics ( email )

Opletalova 26
Prague, 11000
Czech Republic

Filip Smolik

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Jaromir Baxa

Charles University in Prague - Institute of Economic Studies ( email )

Opletalova 26
Praha 1, 11000
Czech Republic

Institute of Information Theory and Automation, Prague ( email )

Pod vodarenskou vezi 4
Praha, CZ-18208
Czech Republic

Register to save articles to
your library

Register

Paper statistics

Downloads
38
Abstract Views
322
PlumX Metrics