Pentecost_EJF - Final revision.pdf (3.52 MB)
Contagion from the crises in the Euro-zone: where, when and why?
journal contribution
posted on 2019-04-08, 08:51 authored by Eric PentecostEric Pentecost, Wenti Du, Graham Bird, Thomas Willett© 2019, © 2019 Informa UK Limited, trading as Taylor & Francis Group. The prevalence of contagion between the Euro-zone countries and other European countries since the Greek crisis of 2009 is now well–known, but the factors that influence the pattern of this contagion are not well understood. We investigate this question both within Europe and beyond to the USA and Japan, using an asymmetric M-GARCH model that focuses on extreme values of the risk premia on government bonds. We compare these extreme values with news of major events and find that they are highly correlated. We find a different pattern of contagion emanating from Ireland compared to the other crisis countries of Greece, Italy, Portugal and Spain. We also examine the factors that have made countries vulnerable to contagion and find that financial factors are more important than trade ones. However, intra-Euro-zone trade has also been a significant factor between the major Euro-zone economies. There is little evidence that global factors affect contagion between EU member states, but some evidence that nominal exchange rate movements offer a degree of insulation from contagion for the non-Euro zone states.
History
School
- Business and Economics
Department
- Economics
Published in
The European Journal of FinanceVolume
25Issue
14Pages
1309 - 1327Citation
PENTECOST, E.J. ... et al., 2019. Contagion from the crises in the Euro-zone: where, when and why? European Journal of Finance, 25 (14), pp.1309-1327.Publisher
© Taylor and FrancisVersion
- AM (Accepted Manuscript)
Publisher statement
This is an Accepted Manuscript of an article published by Taylor & Francis in The European Journal of Finance on 14 March 2019, available online: http://www.tandfonline.com/10.1080/1351847X.2019.1589552.Acceptance date
2019-02-26Publication date
2019-03-14ISSN
1351-847XeISSN
1466-4364Publisher version
Language
- en