Has the CDS Market influenced the borrowing cost of European countries during the sovereign crisis?

Abstract : 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.
Type de document :
Article dans une revue
Journal of International Money and Finance, Elsevier, 2012, Vol. 31 (Issue 3), p. 481-497
Liste complète des métadonnées

https://hal-rbs.archives-ouvertes.fr/hal-00739732
Contributeur : Sandrine Palmer <>
Soumis le : lundi 8 octobre 2012 - 17:24:13
Dernière modification le : mardi 16 octobre 2018 - 11:40:02

Identifiants

  • HAL Id : hal-00739732, version 1

Collections

Citation

Anne-Laure Delatte, Mathieu Gex, Antonia Lòpez-Villavicencio. Has the CDS Market influenced the borrowing cost of European countries during the sovereign crisis?. Journal of International Money and Finance, Elsevier, 2012, Vol. 31 (Issue 3), p. 481-497. 〈hal-00739732〉

Partager

Métriques

Consultations de la notice

486