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Measuring sovereign contagion in Europe

Author

Listed:
  • Massimiliano Caporin

    (Univerista' di Padova)

  • Loriana Pelizzon

    (Univerista' Ca' Foscari Venezia and MIT Sloan)

  • Francesco Ravazzolo

    (Norges Bank (Central Bank of Norway) and BI Norwegian Business School)

  • Roberto Rigobon

    (MIT Sloan and NBER)

Abstract

This paper analyzes the sovereign risk contagion using CDS spreads for the major euro area countries. Using several econometric approaches (non linear regression, quantile regression and Bayesian quantile with heteroskedasticity) we show that propagation of shocks in Europe's CDS's has been remarkably constant even though in a signi cant part of the sample periphery countries have been extremely a ected by their sovereign debt and scal situations. Thus, the integration among the di erent countries is stable, and the risk spillover among countries is not a ected by the size of the shock.

Suggested Citation

  • Massimiliano Caporin & Loriana Pelizzon & Francesco Ravazzolo & Roberto Rigobon, 2012. "Measuring sovereign contagion in Europe," Working Paper 2012/05, Norges Bank.
    • Handle: RePEc:bno:worpap:2012_05
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    More about this item

    Keywords

    Sovereign Risk; Contagion;

    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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