آزمون برای یک استراحت در تداوم میزان بازده اوراق قرضه دولتی EMU
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|24061||2014||10 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Banking & Finance, Volume 41, April 2014, Pages 109–118
This study tests for a break in the persistence of EMU government bond yield spreads examining data from France, Italy and Spain and using German interest rates as a kind of benchmark. The results reported here provide evidence for breaks between 2006 and 2008. The persistence of the yield spreads against German government bonds has increased significantly after this period. This could be a sign of higher sovereign credit risk (and possibly even redenomination risk) caused by the debt crisis in the euro area. We find clear indications for non-stationary behavior after the breakpoints and empirical evidence for positive excess kurtosis and GARCH-effects when persistence increases.
The sovereign debt crisis in the euro area has had major consequences for European bond markets. Already before the Greek debt swap was implemented, the difficult fiscal situation in some member countries caused growing concerns among investors about increasing sovereign credit risk. As a matter of fact, after the credit event in Greece redenomination risk due to fears of a potential end of the Euro became a phenomenon of relevance. The return of exchange rate risk after the collapse of a currency union or some other system of fixed exchange rates can indeed be of some importance for financial markets. While the literature has not focused too strongly on historical experiences with exits from currency unions, Rose (2007) documented quite a number of cases after the end of World War II. Moreover, there is also a vivid discussion about the breakdown of the Bretton Woods system (e.g., Basse, 2006). Moreover, Kang (2013) examined the process of the abandonment of the fixed exchange rate regime in South Korea during the East Asian crisis. As a consequence of the crisis in Europe the low yield spreads among government bonds issued by the member states of the European Monetary Union (EMU) – which mainly were a result of the introduction of the common currency – now seem to be a phenomenon of happier times. In fact, creditors have started to distinguish clearly between the different member states of the euro area. We use techniques of time series analysis to examine how sovereign credit risk and redenomination risk have affected government bond yields in the eurozone. While we do not use the classical event study methodology our approach still focuses on timing issues by searching for structural breaks in yield differentials. The paper examines data on interest rates from the four economically most important member states of the euro area (namely France, Germany, Italy and Spain). Following Lund (1999) we use German government bond yields as some kind of benchmark because this country is generally assumed to pursue a relatively prudent fiscal policy. Baum and Barkoulas (2006) have shown that there could be fractional cointegration among European government bond yields. Therefore, we employ a new test procedure recently proposed by Sibbertsen and Kruse (2009) which allows for fractional integration to test for constant persistence behavior of the spreads to identify possible changes to the risk premia compensating investors for default risk and exchange rate risk. The insights gained from this exercise in financial econometrics should be important for a number of reasons. First of all, Abad et al. (2010) argued convincingly that there is a large literature on international equity market linkages but that there are only few papers examining bond systemic risk or international bond market co-movements and have noted that this fact is remarkable because the market capitalization of international bond markets is much larger than that of international equity markets. Moreover, they argued that international bond market linkages have to be analyzed in more detail because empirical findings with regard to this topic can have implications for the cost of financing, monetary policymaking, interest rate forecasting and bond portfolio diversification. Therefore, we will try to add some additional empirical findings to this important literature. Moreover, there could be important consequences for risk managers in financial institutions. Especially European life insurers that hold large amounts of EMU long-term sovereign debt to neutralize the interest rate risk inherent to their liabilities have to answer the question whether German, French, Italian and Spanish government bonds still are almost perfect substitutes (e.g., Basse et al., 2012). The paper is structured as follows: The second section gives a brief review of the relevant literature. Section 3 then introduces the data examined and also discusses some methodological issues. Before concluding in the 5th section the results of our empirical investigations are reported and discussed in Section 4.
نتیجه گیری انگلیسی
The results reported above illustrate quite clearly that the current sovereign debt crisis in the euro area does affect the relationship among government bond yields in the countries examined. Most important, there is empirical evidence for structural change affecting the yield spreads among sovereign debt issued by Germany and the three other major member countries of the Euro area. The temporal characteristics of interest rate differentials now seem to be different. In fact, the grade of integration of the time series examined here during the crisis now is closer to I(1)I(1) than to I(0)I(0). These findings do indicate that financial markets, pricing government debt in the euro area meanwhile focus more strongly on sovereign credit risk – and possibly even redenomination risk. Our results do have some implications: Most important, taking a political perspective there now seem to be real fears that the European monetary union could break apart. These worries might have consequences for financial markets. Risk managers in financial institutions, for example, now should be aware that German and Spanish government bonds are almost no perfect substitutes anymore. This empirical finding has a number of implications – especially with regard to the regulation of financial markets and the risk management processes in banks and insurance companies. Basse et al. (2012), for example, have noted that structural change in European government bond markets should matter for regulators and risk managers in financial institutions. More specifically, they have argued that the financial services industry and its regulators should focus more strongly on the information provided by the yield spreads among government bonds issued by different EMU member countries and that regulators especially should think about the way Solvency II, the proposed new set of regulatory requirements for the European insurance industry, handles sovereign credit risk. Currently, there are plans to treat all EMU governments bonds alike in terms of solvency capital requirement calculations. This approach would completely ignore sovereign credit risk and redenomination risk. Accepting this point of view, German and Italian long-term government bonds, for example, would (at least from a regulatory perspective) be equally well suited to neutralize the interest rate risks inherent in the liabilities of a German life insurance company. The empirical evidence reported above does support the doubts because EMU government bond markets seem to have started to price sovereign credit risk and probably even redenomination risk. Interestingly, Geyer et al. (2004) already stressed the importance of adequate risk management models for investors in EMU government bonds when yield spreads among Eurozone government bonds where extremely low. In this paper the authors pointed towards differences to country-specific default risk and to liquidity. However, they also noted that contrary to widely held beliefs by market practitioners there was evidence that the spreads between government bond yields in the different EMU countries could not be explained by liquidity differences alone arguing that even back then there existed exchange rate risk because of a small but positive probability of a breakdown of the EMU. Today most market participants seem to share their point of view. Consequently, risk premia in the data set examined here clearly do reflect the existence of sovereign credit risk and redenomination risk.