Financial connectedness between Eurozone core & periphery: a disaggregated view

Georgios Magkonis; Andreas Tsopanakis

doi:10.1017/S1365100518000998

Financial connectedness between Eurozone core & periphery: a disaggregated view

Georgios Magkonis, Andreas Tsopanakis

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Abstract

This paper examines the financial stress interconnectedness among GIIPS economies and Germany. Based on market level financial stress indices, it examines the stress transmission process as well as the causal network relationships in banking sector, bond, money and stock markets. The period under investigation, 2001-2013, allows to test the effects of financial crisis of 2008 as well as the subsequent European sovereign crisis. Using two alternative techniques for connectedness analysis, our evidence suggests that the peripheral economies of Italy and Spain play a highly significant role in the stress transmission in all markets, especially in the cases of banks and equity markets. Moreover, we visualize our results using network analysis. Contrary to common wisdom, Portugal, Ireland, and mainly Greece, do not seem to have an important role in amplifying stress levels.

Original language	English
Journal	Macroeconomic Dynamics
Early online date	31 Jan 2019
DOIs	https://doi.org/10.1017/S1365100518000998
Publication status	Early online - 31 Jan 2019

Keywords

Eurozone
stress transmission
connectedness analysis
spillovers
networks

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10.1017/S1365100518000998

Disaggregated Financial Inteconnectedness_Magkonis
This article has been published in a revised form in Macroeconomic Dynamics http://doi.org/10.1017/S136100518000998. This version is free to view and download for private research and study only. Not for re-distribution, re-sale or use in derivative works. © Cambridge University Press.
Accepted author manuscript (Post-print), 1.15 MB

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abstract = "This paper examines the financial stress interconnectedness among GIIPS economies and Germany. Based on market level financial stress indices, it examines the stress transmission process as well as the causal network relationships in banking sector, bond, money and stock markets. The period under investigation, 2001-2013, allows to test the effects of financial crisis of 2008 as well as the subsequent European sovereign crisis. Using two alternative techniques for connectedness analysis, our evidence suggests that the peripheral economies of Italy and Spain play a highly significant role in the stress transmission in all markets, especially in the cases of banks and equity markets. Moreover, we visualize our results using network analysis. Contrary to common wisdom, Portugal, Ireland, and mainly Greece, do not seem to have an important role in amplifying stress levels.",

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N2 - This paper examines the financial stress interconnectedness among GIIPS economies and Germany. Based on market level financial stress indices, it examines the stress transmission process as well as the causal network relationships in banking sector, bond, money and stock markets. The period under investigation, 2001-2013, allows to test the effects of financial crisis of 2008 as well as the subsequent European sovereign crisis. Using two alternative techniques for connectedness analysis, our evidence suggests that the peripheral economies of Italy and Spain play a highly significant role in the stress transmission in all markets, especially in the cases of banks and equity markets. Moreover, we visualize our results using network analysis. Contrary to common wisdom, Portugal, Ireland, and mainly Greece, do not seem to have an important role in amplifying stress levels.

AB - This paper examines the financial stress interconnectedness among GIIPS economies and Germany. Based on market level financial stress indices, it examines the stress transmission process as well as the causal network relationships in banking sector, bond, money and stock markets. The period under investigation, 2001-2013, allows to test the effects of financial crisis of 2008 as well as the subsequent European sovereign crisis. Using two alternative techniques for connectedness analysis, our evidence suggests that the peripheral economies of Italy and Spain play a highly significant role in the stress transmission in all markets, especially in the cases of banks and equity markets. Moreover, we visualize our results using network analysis. Contrary to common wisdom, Portugal, Ireland, and mainly Greece, do not seem to have an important role in amplifying stress levels.

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KW - spillovers

KW - networks

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Financial connectedness between Eurozone core & periphery: a disaggregated view

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Keywords

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