Published in:European Stability Mechanism Working Paper ; No. 45
Extent:
1 Online-Ressource (78 p)
Language:
English
DOI:
10.2139/ssrn.3666217
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 11, 2020 erstellt
Description:
The systemic importance of a country is a crucial component in the European Stability Mechanism's assessment of financial assistance requests. However, disentangling the effect of developments in one country on other countries in real time is fraught with difficulties. Using empirical methods that provide ex-ante measures of risk exposure, we find that changes in the tail risks of Greek sovereign bond returns resulted in immediate and significant cross-market spillovers to other euro area sovereign bond returns. Our approach provides real-time insights on evolving cross-market interdependencies, such as Germany gradually becoming a safe haven from Greece. We confirm that developments in Greece drive our tail-risk results by linking them to a newly developed intra-day event database. This approach also allows us to provide a more intuitive quantification of the spillovers emanating from Greece. Taken together, our findings demonstrate that developments in Greece significantly affected other euro area sovereign bond markets over and beyond global, euro area and country-specific factors. Our results provide evidence for the systemic importance of Greece throughout the European sovereign debt crisis