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- handle: 10670/1.bm5lrv
- hal: hal-00739732
Mots-clés
Sovereign credit default swaps European sovereign crisis Nonlinearity Cointegration Price discovery process C - Mathematical and Quantitative Methods/C.C3 - Multiple or Simultaneous Equation Models • Multiple Variables/C.C3.C33 - Panel Data Models • Spatio-temporal Models G - Financial Economics/G.G0 - General/G.G0.G01 - Financial Crises G - Financial Economics/G.G1 - General Financial Markets/G.G1.G15 - International Financial MarketsSujets proches
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Anne-Laure Delatte et al., « Has the CDS Market influenced the borrowing cost of European countries during the sovereign crisis? », HAL-SHS : économie et finance, ID : 10670/1.bm5lrv
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Résumé
This paper assesses the potential influence of the growing CDS market on the borrowing cost of sovereign states during the European sovereign crisis. We analyze the sovereign debt market to ascertain the pattern of information transmission between the CDS and corresponding bond markets. Our methodological innovation is the use of a non-linear specification rather than the linear VECM specification customarily employed. Using a panel smooth transition model during the 2008-2010 period, we find that: 1) linearity tests clearly reject the null hypothesis of a linear transmission mechanisms between the bond and the CDS markets; 2) market distress alters the mutual influence and 3) the higher the distress the more the CDS market dominates the information transmission between CDS and bond markets.