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Beyond spreads: Measuring sovereign market stress in the euro area

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  • Garcia-de-Andoain, Carlos
  • Kremer, Manfred

Abstract

We develop a novel composite indicator to measure sovereign bond market stress in the euro area. The indicator integrates yield and liquidity spreads along with volatility into an overall measure of sovereign market stress. An application to the spillover literature suggests that stress mainly originates from a few countries, but that spillover patterns also vary over time.

Suggested Citation

  • Garcia-de-Andoain, Carlos & Kremer, Manfred, 2017. "Beyond spreads: Measuring sovereign market stress in the euro area," Economics Letters, Elsevier, vol. 159(C), pages 153-156.
    • Handle: RePEc:eee:ecolet:v:159:y:2017:i:c:p:153-156
    DOI: 10.1016/j.econlet.2017.06.042
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    References listed on IDEAS

    as
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    5. Garcia-de-Andoain, Carlos & Kremer, Manfred, 2017. "Beyond spreads: Measuring sovereign market stress in the euro area," Economics Letters, Elsevier, vol. 159(C), pages 153-156.
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    8. Viral Acharya & Itamar Drechsler & Philipp Schnabl, 2014. "A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk," Journal of Finance, American Finance Association, vol. 69(6), pages 2689-2739, December.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial stress index; Systemic risk; Sovereign debt crisis; Spillover index;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • G01 - Financial Economics - - General - - - Financial Crises
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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