Akdoğu, Serpil Kahraman (2012): CDS, bond spread and sovereign debt crisis in peripherial EU. Published in: Crisis Aftermath: Economic policy changes in the EU and its Member States, Conference Proceedings, Szeged, University of Szeged , Vol. ISBN 9, (2012): pp. 126-133.
Download (448Kb) | Preview
In the last decade, many economies were marked by the severe financial crises since the Great Depression. The euro area faced considerable economic difficulties and the CDS has become the focal point of the current crisis. The euro sovereign debt crises started in Greece and later on, spread to the other peripherial European countries Spain, Portugal, Ireland, Italy and still continues. This experience address the increasing importance of „fiscal discipline” and the role of European Central Bank (ECB), if ECB with national central banks take on all responsibility in government bond markets, Euro area could be stabilized. Policy makers argue both financial and monetary policies in European Union (EU), and convergence criteria to adopting Euro. This paper aims to determine the relationship between credit default swap (CDS), bond spread and the debt ratio of the countries. In this framework, the interaction between CDS and sovereign bond spreads are examined as a measure of perceived country risk. The focus of the study is to show the role of these two variables on peripherial European countries, during the recent euro sovereign debt crisis.
|Item Type:||MPRA Paper|
|Original Title:||CDS, bond spread and sovereign debt crisis in peripherial EU|
|Keywords:||CDS; bond spread; sovereign debt crisis|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt; Debt Management; Sovereign Debt
G - Financial Economics > G0 - General > G01 - Financial Crises
|Depositing User:||Beata Farkas|
|Date Deposited:||06. Aug 2012 14:09|
|Last Modified:||12. Feb 2013 11:57|
Barrios, S. – Iversen, P. – Lewandowska, M. – Setzer, R. (2009): Determinants of Intra-euro Area Government Bond Spreads During the Financial Crisis, Economic Paper 388, European Commission.
Bolton, P. – Olivier, J. (2011): Sovereign Default Risk and Bank Fragility in Financially Integrated Economies, NBER Working Paper 16899.
Delatte, A. – Gex, M. – Villavicencio, A.L. (2010): Has the CDS market amplified the European Sovereign Crises: A nonlinear Approach, Research Paper, Southwestern Finance Association 50th Annual Meeting, 9-12 March 2011, Houston..
Duffee, G. R. (1996): Treasury Yields and Corporate Bond Yield Spreads: An Empirical Analysis. Finance and Economics Discussion Series, 20.
Duffee, G.R. (1999): Estimating the Price of Default Risk, The Review of Financial Studies, 1, pp. 197-226.
Gomez-Puig M. – Sosvilla-Rivero S. (2011): Causality and Contagion in Peripherial Emu Public Debt Markets a Dynamic Approach, Research Institute of Applied Economics Working Paper 201.
Grauwe, P. (2011): Only a More Active ECB Can Solve the Euro Crisis, CEPS Policy Brief, No. 250.
Landscoot, A.V. (2004): Determinants of Euro Term Structure of Credit Spreads, European Central Bank Working paper Series, No. 397.
Metiu, N. (2011): The EMU in Debt Distress: Contagion in Sovereign Bond Market. Research Paper, European Economic Association & Econometric Society 2011 Parallel Meetings, 25-29 August 2011, Oslo.
O’Kane, D. (2012): The Link Between Eurozone Sovereign Debt and CDS Prices, EDHEC Risk Institute.
Santis, R.A. (2012): The Euro Area Sovereign Debt Crisis, Safe Haven, Credit Rating Agencies and the Spread of the Fever From Greece, Ireland and Portugal, European Central Bank Working Paper Series, No. 1419.