Journal article
What is mine is yours: Sovereign risk transmission during the European debt crisis
Matthew Greenwood-Nimmo, Viet Hoang Nguyen, Yongcheol Shin
Journal of Financial Stability | Elsevier | Published : 2023
Abstract
We develop an empirical network model to characterize the density of bilateral sovereign credit risk spillovers during the European debt crisis. We show that the spillover density is often asymmetric with heavy tails and that its location and shape vary strongly and systematically in relation to published indicators of systemic stress. Using auxiliary panel data models, we show that the intensity of bilateral spillovers is related to the portfolio investment exposures among country pairs. Because our spillover statistics can be updated daily, they represent a valuable supplement to existing weekly and monthly measures of systemic stress.
Grants
Awarded by Australian Research Council
Funding Acknowledgements
We thank the Editor, Iftekhar Hasan, and two anonymous referees whose input has greatly enriched our analysis. We are grateful to Kathryn St John and Catherine Tanuwidjaja for conscientious research assistance and for the constructive discussion of In Choi, Juan Carlos Cuestas, Renee Fry-McKibbin, Jongsuk Hahn, Jingong Huang, John Hunter, Minjoo Kim, Faek Menla Ali, Barry Rafferty, Chris Skeels, Tomasz Wozniak and Eliza Wu. This paper has benefited from comments raised by participants at the 2015 Conference of the Paul Woolley Centre for the Study of Capital Market Dysfunctionality (Sydney, December 2015) , the Australasian Meeting of the Econometric Society (Sydney, July 2016) , the 2016 Asian Meeting of the International Finance and Banking Society (Brunei, August 2016) , the 2016 KAEA-KIPF Conference (Sejong City, August 2016) , the 2016 University of Melbourne-Toulouse School of Economics Workshop (Melbourne, December 2016) , the 2017 Singapore Economic Review Conference (Singapore, August 2017) , the 72nd European Meeting of the Econometric Society (Manchester, August 2019) and by seminar participants at Deakin and Sogang Universities and the Universities of Catania and Piraeus. Greenwood-Nimmo acknowledges financial support from the Australian Research Council (Grant Number DE150100708) and the Faculty of Business and Economics at the University of Melbourne. The usual disclaimer applies.