قرار دادن "C" در داخل بحران ها: سرایت مشکلات، همبستگی و عضو رابط در بازار اوراق قرضه EMU
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of International Financial Markets, Institutions and Money, Volume 27, December 2013, Pages 161–176
We investigate the contagion appetite generated by the current debt crisis in Greece by focusing on six European Monetary Union bond markets, namely the Netherlands, Germany, Italy, Spain, Portugal and France. We use a framework that contains two procedures, a spillover regime/switching model and a time-varying copula model. The empirical evidence confirms contagion appetite to European Monetary Union countries, which are prone to contagion, some because of their excessive macroeconomic imbalances and others because of the sovereign's risk perception and the arbitrage appetites of international bond portfolios; but not an overall contagion effect from the crisis country to all others.
This paper is concerned with the contagion appetite generated by the transmitted shock of Greece's debt crisis to six European Monetary Union (hereafter EMU) bond markets, namely Italy, Spain, France, Portugal, Germany and the Netherlands, using two processes: a spillover regime/switching framework and a time-varying conditional copula. We provide new evidence for the ongoing debate that links the dynamics of conditional correlation and a contagion effect that occurs beyond integration across the EMU bond markets, during the Greek debt crisis, starting in 2010. Finally, our analysis has strong implications for international investors’ optimal portfolios because we analyse the behaviour of correlations between EMU bond markets around and after the beginning of the European debt crisis. Over the first years of Eurozone life, scholars have shed much-needed light on evidence that the EMU has driven to sovereign bond yields integration because of global prospects, such as liquidity conditions (Pagano and von Thadden, 2004 and Favero et al., 2010) and the low risk aversion of investors (Geyer et al., 2004) despite deteriorating macroeconomic fundamentals. Such convergence has been driven by the consequent elimination of global risk and asymmetrical shocks, by allowing cheaper access to debt financing with less uncertainty in financial markets and by fulfilling the vision of European integration (Kim et al., 2006 and Abad et al., 2010). However, since 2010, EMU periphery bond yields started to experience similar large increasing trends and tended to raise when its sovereign risks got higher and when its domestic financial sector worsened. Starting in 2010 and onwards, Greece, Ireland and Portugal all had to withdraw from international bond markets, putting intense pressure on the yields of other EMU members such as, recently, Spain and Italy. European policymakers took measurements in these countries; however, these measurements do not seem to have been enough to ease the spreading recession in EMU economies. As a result, German government bond yields operated as a ‘flight-to-quality’ asset during the crisis (Beber et al., 2009), putting upward pressure on all EMU government bond yields spreads. On the other hand, recent empirical studies argue that domestic macroeconomic imbalances have lead to a significant rise in external borrowing in some EMU countries and the current bursting of government bond bubbles. The combination of high-risk aversion and large current account deficits tended to magnify the incidence of deteriorated public finances on government bond yield spreads (Berger and Nitsch, 2010 and Longstaff et al., 2011) beyond EMU bond market integration. There is a wide international literature on what the term “contagion” entails. Some theories argue that contagion is a significant increase in cross-market linkages after a shock to one country, whereas other theories argue that contagion occurs whenever a shock to one country is transmitted to another country, even if there is no significant change in the cross-market relationships (e.g., Forbes and Rigobon, 2002, Chiang et al., 2010 and Moshirian, 2011). In general, the contagion is distinguished between three types (Pericoli and Sbracia, 2003): (a) the “wake-up-call” contagion in which the crisis initially restricted to one country, providing new information that prompts investors to reassess the default risk of other countries, (b) the “shift” contagion that occurs when the normal cross-market channel intensifies after a crisis in one country with an increased sensitivity to global risk factors instead of country-specific factors and, (c) the “pure” contagion which covers any instance of contagion that is completely unrelated to the level of fundamentals. A large body of empirical research on contagion focuses on emerging economies (e.g., Forbes and Rigobon, 2002, Corsetti et al., 2005 and Chiang et al., 2010) because such economies require greater relative support from the international financial community, while sovereign bonds are closely linked with sovereign risk. Moreover, the linkages and spillovers within and across bonds, stocks and exchange rates have been examine and have been largely explained by within-market interactions and cross-market effects (Engle, 2002, Cappiello et al., 2006, Ehrmann et al., 2011 and Dimitriou and Kenourgios, 2013). As the current European debt crisis became more widespread, recent studies investigated the contagion effects in EMU financial sectors (Beirne and Fratzscher, 2012, De Santis, 2012, Argurou and Kontonikas, 2012, Kalbaska and Gatkowski, 2012 and Samitas and Tsakalos, 2013). This paper is concerned with the correlations, the spillover effects and the patterns of time-varying correlations between the realised volatility of Greek bond returns and the realised volatility of bond returns of six EMU economies, namely Italy, Spain, Portugal, France, Germany and the Netherlands during the latest European debt crisis. Firstly, this paper adopts the definition that contagion is a significant increase in cross-market correlations of volatility after a shock; however, the interdependency between markets that exists in all economies is not necessarily act as the mechanism vehicle for the contagion effect. Secondly, we examine whether a volatile Euro member's bond market (i.e., the burst of the Greek crisis) lead to a simultaneous increase in the risk of other EMU bond portfolios or; if such impact is different across borrowers by distinguishing a contagion appetite within EMU bond markets. We define contagion appetite as a type of contagion, which is a sentimental behaviour of selective risk/arbitrage appetite by international investors as a function of time, who can be diversifiable when they desire, pay arbitrary attention to markets within the Euro area and penalise selectively those governments with weaker expected performances of sovereign fiscal and macroeconomic levels. This is a differentiation from the above types of contagion whereas it is rather a mixture. We argue that the sensitivities of bond returns’ volatility in EMU countries may reflect functional portfolio reallocations between bond markets by shedding only the sovereign bonds that are seen as riskiest among EMU members, in an indiscriminate move, based on their sentimental behaviour across time and not only by macroeconomic imbalances or any strong negative wealth effects associated with the global rise in risk aversion. In this line, we contribute to filling the on-going debate and the existing literature's gaps in the following respects. We carry out an extent spillover process with a time-varying regime state parameter specification that includes the spillover effects of Greek bond volatility. The process shows the extent of how an idiosyncratic shock in an EMU member (i.e., Greece) can be transmitted to all or some others. In line with the international literature, a cross-sectional time series regression analysis is also examined in order to test the contagion effect among idiosyncratic shocks for the six EMU bond markets with respect to the idiosyncratic shock of the Greek bond market. This approach analyses the effect of unexpected shock among bond markets when one is under crisis. In light of the above discussion, we investigate the robustness of our outcomes, providing a time-varying conditional copula analysis in order to test the increasing of correlation ratios to a significant degree. We suggest a bivariate regime/switching time-varying copula framework that uses a regime state variable that varies across the dependency of the marginal distribution's behaviour. The dependence parameter in the copula function is modelled as a time-varying process conditional on previous available information, allowing for time-varying nonlinear relationships. This approach analyses dependency among bond markets when one is under crisis. The empirical findings provide novel insights. We show that volatile Greek bond market affects countries in terms of spillover effects, but do not totally determine an overall contagion effect. We argue that the greater amount of uncertainty in the Greek bond market during the turmoil period is not necessarily linked to an overall contagion effect or a greater proportion of uncertainty in overall EMU markets. On the contrary, volatile Greek bond market differentiates the contagion appetite and the risk perception of international portfolios that pay arbitrary attention to markets within the EMU. The increase in correlation patterns varies between EMU countries and Greek idiosyncratic shocks, not only because of countries’ fiscal stance and macroeconomic imbalances but also because of the international portfolios’ arbitrage appetites. The spreading refinancing problems of some European countries are to some extent caused by a contagion appetite based on their deteriorating competitiveness, risk sentimental appetite and fiscal stance. Countries with similar excessive macroeconomic and financial imbalances are more prone to causing the discrimination and the diversification of investors by raising bond spreads. This is because of strong cross-market linkages and the Euro area's inability to fully adjust to macroeconomic shocks through EMU market integration. The remainder of this paper is organised as follows. Section 2 provides a detailed description of the proposed framework and methodology. In Section 3, the statistical analysis of the data on the European debt bond markets is described, while Section 4 presents and discusses the empirical findings. Finally, Section 5 summarises the conclusions.
نتیجه گیری انگلیسی
We investigate whether a contagion appetite appears in EMU bond markets based on the current Greek debt crisis. In this set-up, we propose a spillover regime/switching model and a bivariate conditional copula model for the bond volatilities of six EMU countries and Greece, during the recent European debt crisis. The empirical evidence confirms a contagion appetite effect from the crisis country to EMU countries. Summarising the empirical findings, we argue that there are forms of contagion within EMU bond markets caused by the current debt crisis. International portfolios discriminate EMU bond markets and pay arbitrary attention to cross-market correlation dynamics within the Eurozone, based not only on their excess macroeconomic and fiscal performances but also driven by behavioural reasons, as a function of time, without taking into account the umbrella of EMU integration. The linkages of bond markets show widespread evidence of this asymmetry, structural changes are spreading to the EMU bond markets with different order of magnitude, while different tail dependence imply that the probability of markets crashing together, because of an overall type of contagion, is not high during periods of financial turmoil.