The EMU sovereign-debt crisis: fundamentals, expectations and contagion

Arghyrou, M.G. and Kontonikas, A. (2012) The EMU sovereign-debt crisis: fundamentals, expectations and contagion. Journal of International Financial Markets, Institutions and Money, 22(4), pp. 658-677. (doi: 10.1016/j.intfin.2012.03.003)

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Abstract

We offer a detailed empirical investigation of the EMU sovereign-debt crisis. We find a marked shift in market pricing behaviour from a ‘convergence-trade’ model before August 2007 to one driven by macro-fundamentals and international risk thereafter. We find evidence of contagion effects, particularly among EMU periphery countries. The EMU debt crisis is divided into an early and current crisis period. Unlike the former where contagion was mainly originating from Greece, the latter involves multiple sources of contagion. Finally, the escalation of the Greek debt crisis since November 2009 is due to an unfavourable shift in country-specific market expectati

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Kontonikas, Professor Alexandros
Authors: Arghyrou, M.G., and Kontonikas, A.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of International Financial Markets, Institutions and Money
ISSN:1042-4431
Published Online:03 April 2012

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