The Financial Connectedness between Eurozone Core and Periphery: A Disaggregated View

48 Pages Posted: 6 Nov 2017

See all articles by Georgios Magkonis

Georgios Magkonis

University of Bradford

Andreas Tsopanakis

Cardiff University - Cardiff Business School

Date Written: November 4, 2017

Abstract

This paper examines the financial stress interconnectedness among GIIPS economies and Germany. Based on market level financial stress indices, it examines the stress transmission process as well as the causal network relationships in banking sector, bond, money and stock markets. The period under investigation, 2001-2013, allows to test the effects of financial crisis of 2008 as well as the subsequent European sovereign crisis. Using two alternative techniques for connectedness analysis, our evidence suggests that the peripheral economies of Italy and Spain play a highly significant role in the stress transmission in all markets, especially in the cases of banks and equity markets. Moreover, we visualize our results using network analysis. Contrary to common wisdom, Portugal, Ireland, and mainly Greece, do not seem to have an important role in amplifying stress levels.

Keywords: Eurozone, Stress Transmission, Connectedness Analysis, Spillovers, Networks

JEL Classification: C43, G15, F30

Suggested Citation

Magkonis, Georgios and Tsopanakis, Andreas, The Financial Connectedness between Eurozone Core and Periphery: A Disaggregated View (November 4, 2017). Available at SSRN: https://ssrn.com/abstract=3065221 or http://dx.doi.org/10.2139/ssrn.3065221

Georgios Magkonis

University of Bradford

Bradford
Bradford, BD9 4JL
United Kingdom

Andreas Tsopanakis (Contact Author)

Cardiff University - Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

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