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Financial contagion dynamics from the US to the PIIGS amidst the global financial crisis

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  • Tzomakas, Christos

Abstract

The European Monetary Union (EMU) sovereign debt crisis has been thoroughly investigated in the literature. However, our analysis attempts to shed light on the link between the U.S. and the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) bond markets during the Great Recession. We employ a daily 12-year period dataset and utilize an EGARCH-X approach. Our results reveal significant contagion effects from the U.S. bond market towards the yields of PIIGS bonds. However, our findings suggests that the distribution imposed on the standardized residuals is crucial for identifying the magnitude of the contagion.

Suggested Citation

  • Tzomakas, Christos, 2024. "Financial contagion dynamics from the US to the PIIGS amidst the global financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:quaeco:v:97:y:2024:i:c:s1062976924001017
    DOI: 10.1016/j.qref.2024.101895
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    More about this item

    Keywords

    Financial crisis; Contagion; PIIGS; European sovereign debt crisis; Great Recession; EGARCH; Heavy-tailed distributions;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F30 - International Economics - - International Finance - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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