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Sovereign debt and systemic risk in the eurozone

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  • Popescu, Alexandra
  • Turcu, Camelia

Abstract

The paper analyzes the eurozone crisis through the lens of a new systemic sovereign risk measure. This measure is built on countries' budgetary constraint and the Marginal Expected Shortfall (MES) estimated through a DCC-Garch model. We use daily data on government bonds yields 10Y and quarterly macroeconomic data over the period 2001−2013. Our measure, applied to the sovereign debt crisis of the euro area, captures countries' expected financing requirements in times of crisis. The results underline the most systemically important countries and their contribution to a potential system's default. Specifically, Italy and Greece are highlighted as the most systemically important countries in crisis times.

Suggested Citation

  • Popescu, Alexandra & Turcu, Camelia, 2017. "Sovereign debt and systemic risk in the eurozone," Economic Modelling, Elsevier, vol. 67(C), pages 275-284.
    • Handle: RePEc:eee:ecmode:v:67:y:2017:i:c:p:275-284
    DOI: 10.1016/j.econmod.2016.12.032
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    Cited by:

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    2. Tam NguyenHuu & Deniz Karaman Orsal, 2022. "Geopolitical risks and financial stress in emerging economies," Working Papers 2022.09, International Network for Economic Research - INFER.
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    4. Omid Farkhondeh Rouz & Hossein Sohrabi Vafa & Arash Sioofy Khoojine & Sajjad Pashay Amiri, 2024. "Interconnectedness of systemic risk in the Chinese economy: the Granger causality and CISS indicator approach," Risk Management, Palgrave Macmillan, vol. 26(2), pages 1-24, May.
    5. Kolari, James W. & López-Iturriaga, Félix J. & Sanz, Ivan Pastor, 2020. "Measuring systemic risk in the U.S. Banking system," Economic Modelling, Elsevier, vol. 91(C), pages 646-658.
    6. Szafranek, Karol, 2021. "Disentangling the sources of inflation synchronization. Evidence from a large panel dataset," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 229-245.
    7. Christian Brownlees & Giuseppe Cavaliere & Alice Monti, 2018. "Evaluating The Accuracy Of Tail Risk Forecasts For Systemic Risk Measurement," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 1-25, June.
    8. Wang, Xiaoting & Hou, Siyuan & Shen, Jie, 2021. "Default clustering of the nonfinancial sector and systemic risk: Evidence from China," Economic Modelling, Elsevier, vol. 96(C), pages 196-208.
    9. Szafranek, Karol, 2021. "Evidence on time-varying inflation synchronization," Economic Modelling, Elsevier, vol. 94(C), pages 1-13.
    10. Nadal De Simone, Francisco, 2021. "Measuring the deadly embrace: Systemic and sovereign risks," Research in International Business and Finance, Elsevier, vol. 56(C).

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    More about this item

    Keywords

    Eurozone; Debt crisis; Sovereign bonds; Systemic risk;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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