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

Arghyrou, Michael Georgiou ORCID: https://orcid.org/0000-0001-6222-5086 and Kontonikas, Alexandros 2012. The EMU sovereign-debt crisis: fundamentals, expectations and contagion. Journal of International Financial Markets, Institutions and Money 22 (4) , pp. 658-677. 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 expectations.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Uncontrolled Keywords:	Euro area; Crisis; Spreads; Fundamentals; Expectations; Contagion
Publisher:	Elsevier
ISSN:	1042-4431
Last Modified:	21 Oct 2022 10:13
URI:	https://orca.cardiff.ac.uk/id/eprint/39451

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