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Causality in the EMU sovereign bond markets

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  • González-Sánchez, Mariano

Abstract

Sovereign debt markets can be mechanisms of contagion for financial policy interventions, and financial risks in general. This study tests causality in-mean and in-variance on a full interest rate curve. The results for a daily sample of sovereign bond market prices (from France, Germany, Italy, Spain, Switzerland, the United Kingdom and the United States), show that latent factors of the United Stated (long-term) and Germany (short-term) are the main drivers of causality in-mean. The causality in-variance results show that the effect is mostly in the Economic and Monetary Union, highlighting Spain as the main driver.

Suggested Citation

  • González-Sánchez, Mariano, 2018. "Causality in the EMU sovereign bond markets," Finance Research Letters, Elsevier, vol. 26(C), pages 281-290.
    • Handle: RePEc:eee:finlet:v:26:y:2018:i:c:p:281-290
    DOI: 10.1016/j.frl.2018.02.020
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    More about this item

    Keywords

    Asymmetric causality; Sovereign bond market; Nelson–Siegel;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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