علیت و سرایت بیماری در بازارهای بدهی های مستقل اقتصادی اروپا و اتحادیه پولی

This paper contributes to the literature by applying the Granger-causality approach and endogenous breakpoint test to offer an operational definition of contagion to examine European Economic and Monetary Union (EMU) countries public debt behavior. A data

From the introduction of the euro in January 1999 until the collapse of the US financial institution Lehman Brothers in September 2008, sovereign yields of euro area issues moved in a narrow range with only very slight differences across countries (see Fig. 1 and Fig. 2). Nevertheless, following the Lehman Brothers collapse severe tensions emerged in financial markets worldwide, including the euro zone bond market. In fact, not only did the period of financial turmoil turn into a global financial crisis, but it also began to spread to the real sector, with a rapid, synchronized deterioration in most major economies. This financial crisis put the spotlight on the macroeconomic and fiscal imbalances within European Economic and Monetary Union (EMU) countries which had largely been ignored during the period of stability when markets had seemed to underestimate the possibility that governments might default (see Beirne & Fratzscher, 2013). Furthermore, in some EMU countries, problems in the banking sector spread to sovereign states because of their excessive debt issues made in order to save the financial industry; eventually, the global financial crisis grew into a full-blown sovereign debt crisis. Indeed, since 2010, Greece has been bailed out twice and Ireland, Portugal and Cyprus have also needed bailouts to stay afloat. These events brought to light the fact that the origin of sovereign debt crises in the euro area varies according to the country and reflects the strong interconnection between public debt and private debt (see Gómez-Puig & Sosvilla-Rivero, 2013).1 In this scenario, some of the research to date has focused on the analysis of interactions between the sovereign market and the financial sector [see Mody (2009), Ejsing and Lemke (2009), Gennaioli, Martin, and Rossi (2014), Broner and Ventura (2011), Bolton and Jeanne (2011) and Andenmatten and Brill (2011)]. Other researchers have discussed transmission and/or contagion between sovereigns in the euro area context [see Kalbaska and Gatkowski (2012), Metieu (2012), Caporin, Pelizzon, Ravazzolo, and Rigobon (2013), Beirne and Fratzscher (2013) and Gorea and Radev (2014) to name a few]. Finally, a strand of research has examined structural breaks and sovereign credit risk in the euro area [see, e. g., Basse, Friedrich, and Kleffner (2012), Gruppe and Lange (in press) and Basse (2014)]. The aim of this paper is to contribute to the last two branches of the literature by examining not only the transmission of sovereign risk, but also the contagion in euro area public debt markets. In the literature there is a considerable amount of ambiguity concerning the precise definition of contagion. There is no theoretical or empirical definition on which researchers agree and, consequently, the debate on exactly how to define contagion not only is academic, but also has important implications for measuring the concept and for evaluating policy responses. Pericoli and Sbracia (2003) note five definitions of contagion used in the literature. Two of them have been predominantly used in empirical studies to analyze it in financial markets and have been adopted in common usage by governments, citizens and policymakers. The first defines contagion depending on the channels of transmission that are used to spread the effects of the crisis, while the second defines it depending on whether the transmission mechanisms are stable through time. Masson (1999) and Kaminsky and Reinhart (2000) apply the first definition, which argues that contagion arises when common shocks and all channels of potential interconnection either are not present or have been controlled for. So, the term contagion will only be applied when a crisis in one country may conceivably trigger a crisis elsewhere for reasons unexplained by macroeconomic fundamentals2 — perhaps because it leads to shifts in market sentiment, or changes the interpretation given to existing information. According to the second definition, which was proposed in a seminal paper by Forbes and Rigobon (2002), contagion is a significant increase in cross-market linkages after a shock to one country (or group of countries).3 Therefore, if two markets show a high degree of co-movement during periods of stability, even if they continue to be highly correlated after a shock to one market, this may not constitute contagion, but only the outcome of the “interdependence” that has always been present in the markets. The empirical analysis of Forbes and Rigobon definition of contagion implies then the presence of a tranquil, pre-crisis period in order to be able to examine whether a change in the intensity of the transmission has occurred after the shock. In this paper, we will use an operational approach based on the second definition4 in order to capture the phenomenon of contagion quantitatively. Besides, among the five general strategies5 that have been used in the literature, our analysis will be related to one of the most conventional methodologies for testing for contagion: the analysis of cross-market correlations. However, we not only investigate changes in cross-market interdependencies via cointegration analysis, but also explore changes in the existence and direction of causality by means of a Granger-causality approach6 before and after endogenously (data-based) identified crises. Hence, the definition of contagion that we will explore in the remainder of this paper is the following: an abnormal increase in the number or in the intensity of causal relationships, compared with that of tranquil period, triggered after an endogenously detected shock. Most studies in the literature investigate changes in cross-market correlations (see, e.g., Syllignakis & Kouretas, 2011); very few explore changes in the existence and direction of causality. Exceptions are studies by Edwards (2000) who focuses on Chile, Baig and Goldfajn (2001) who investigate contagion from Russia to Brazil, Gray (2009) who examines spillovers in Central and Eastern European countries, and both Granger, Huang, and Yang (2000) and Sander and Kleimeier (2003) who investigate spillovers during the Asian crisis. However, a small number of studies have applied a Granger-causality approach to the investigation of changes in the existence and direction of transmission in euro area debt markets. Among them, Kalbaska and Gatkowski (2012) analyze the dynamics of the credit default swap (CDS) market of peripheral EMU countries along with three central European countries (France, Germany and the UK) for the period of 2008–2010, and Gómez-Puig and Sosvilla-Rivero (2013) focus on the existence of possible Granger-causal relationships between the evolution of the yield of bonds issued solely by peripheral EMU countries during the period 1999–2010. Therefore, our study contributes to this literature by applying a Granger-causality approach to 10-year sovereign yields7 of both peripheral and central EMU countries8 on an extended time period spanning from the inception of the euro in January 1999, well before the global financial and sovereign debt crises, to December 2012. But, unlike previous studies in the literature (see Sander & Kleimeier, 2003 o Kalbaska & Gatkowski, 2012), we do not set a specific breakpoint based on a priori knowledge of the potential break date. In our analysis, we use two techniques that take into consideration that the timing of the break is unknown and allow the data to indicate when regime shifts occur. Thus, break dates that identify the shock triggering contagion are determined endogenously by the model in each of the potential pair-wise causal relationships.9 The rest of the paper is organized as follows. The next section explains the econometric methodology. The dataset used to analyze causality is described in Section 3. Section 4 presents the empirical findings, while Section 5 offers some concluding remarks.

This paper has three main objectives: to test for the existence of possible Granger-causal relationships in the evolution of the yield of bonds issued by both peripheral and central EMU countries, to determine endogenously the breakpoints in the evolution of those relationships and to detect contagion episodes according to an operative definition: an abnormal increase in the number or in the intensity of causal relationships compared with that of tranquil periods, triggered by an endogenously detected shock. The most important results that emerge from our analysis are the following: (1) Around two thirds out of the total endogenously identified breakpoints occur after November 2009, when Papandreou's government revealed that its finances were far worse than previous announcements, suggesting that most of the breakpoints can be explained by systemic shocks directly connected to the euro sovereign debt crisis. (2) The number of causal relationships increases as the financial and sovereign debt crisis unfolds in the euro area, and causality patterns after the break dates are more frequent when EMU peripheral countries are the triggers. (3) In the crisis period we find evidence of 101 causal relationships: 41 represent new causality linkages and 60 are patterns that already existed in the tranquil period. However, we find an intensification of the causal relationship in 42 out of the 60 cases. In our opinion, these 41 new causality patterns, together with the intensification of the causal relationship in 70% of the cases can be considered an important operative measure of contagion that is consistent with the definition that we have proposed. Regarding policy implications, our results seem to indicate that EMU has brought about strong interlinkages of the participating countries which are reasonable within a group of countries that share an exchange rate agreement (a common currency in the case of the euro area) and where financial crises tend to be clustered (see Beirne & Fratzscher, 2013). Therefore, we consider that our results might have some practical meaning for investors and policymakers, as well as some theoretical insights for academic scholars interested in the behavior of EMU sovereign debt markets. Our methodology could be used as a tool to provide information regarding the drivers and the time-varying intensity of crisis transmission, in the euro area sovereign debt markets, after a shock, which is an important question that can help policymakers to react in the future in order to avoid another. Finally, it should be noted that our analysis is devoted to bivariate series analysis. The extension to multivariate series analysis is reserved for future research. In view of the encouraging results of the present study, some optimism about the benefits from implementing this analysis seems justified.