Testing sovereign contagion via changes of CDS price in European debt crisis
Bibliographic Data
| ID | 12846235 |
|---|---|
| Authors | Duong Thi Hieu (corresponding author) |
| Year | 2016 |
| Volume | 38 |
| Issue | 1 |
| Pages | 5-28 |
| Publication date | 2016-03-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Society and Economy (JOURNAL) |
| Journal identifiers | ISSN: 1588-970X • E-ISSN: 1588-9726 |
| Publisher | Akadémiai Kiadó (PUBLISHER • HU) |
| DOI | 10.1556/204.2016.38.1.2 |
| OpenAlex | W2346907126 |
| Language | EN |
| References cited | 5 |
Much empirical research has been carried out to test the presence of contagion in European sovereign debt crisis since the beginning of 2010. In this paper I will consider contagion as a change in the transmission mechanism of shock, illustrating co-movement among the sovereign credit default swap (CDS) markets of seven European countries and the UK from November 2008 up until June 2013. By examining daily pricing data of the five-year sovereign CDS contracts of these countries, I found a large increase in the volatility in the period of crisis, and hence a correlation test is invalid, but parametric method with GARCH residual time series and quantile regression approach are applicable. The first test modelling time series’ residuals by GARCH formula shows no contagion. In the second method, slope equality tests analyse the stability in linear relationship among markets across quantile and find no evidence of contagion. This final result of no contagion during the debt crisis suggests that the reason of the sovereign risk’s propagation is the conventional interdependence among countries, not the greatness of the shock
Autoregressive conditional heteroskedasticity · Credit default swap · Credit risk · Debt · Debt crisis · Economics · European debt crisis · European integration · European union · Financial contagion · Financial crisis · Financial economics · International economics · Macroeconomics · Monetary economics · Sovereign credit · Sovereign debt · Sovereignty · Volatility (finance · Banking stability, regulation, efficiency · Credit Risk and Financial Regulations · Global Financial Crisis and Policies · Finance
| Highly cited | No |
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