BibTex RIS Cite

The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis

Year 2014, Volume: 4 Issue: 1, 83 - 92, 01.03.2014

Abstract

This research examines the effects of sovereign downgrades on European financial markets between 2005 and 2012. Vector Autoregression (VAR) techniques are used to investigate the presence of contagion effects after a sovereign downgrade across equity indices, five year Credit Default Swaps (CDS) and ten year government bonds of the investigated European states. Sovereign downgrades are found to be associated with an increase in equity returns, and cause significant increases in the cost of insuring debt through CDS and the yield of government debt. The Greek and Irish downgrades are to found to have significant reverberations throughout European financial markets. German CDS spreads are found to increase when a European state is downgraded, signalling their use by investors as a barometer of European-wide defaults. Though credit rating agencies clearly missed the European sovereign crisis prior to 2007, their rating downgrades are still found to cause significant effects within European financial markets.

Year 2014, Volume: 4 Issue: 1, 83 - 92, 01.03.2014

Abstract

There are 0 citations in total.

Details

Other ID JA67ZC26KT
Journal Section Research Article
Authors

Shaen Corbet This is me

Publication Date March 1, 2014
Published in Issue Year 2014 Volume: 4 Issue: 1

Cite

APA Corbet, S. (2014). The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis. International Journal of Economics and Financial Issues, 4(1), 83-92.
AMA Corbet S. The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis. IJEFI. March 2014;4(1):83-92.
Chicago Corbet, Shaen. “The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis”. International Journal of Economics and Financial Issues 4, no. 1 (March 2014): 83-92.
EndNote Corbet S (March 1, 2014) The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis. International Journal of Economics and Financial Issues 4 1 83–92.
IEEE S. Corbet, “The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis”, IJEFI, vol. 4, no. 1, pp. 83–92, 2014.
ISNAD Corbet, Shaen. “The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis”. International Journal of Economics and Financial Issues 4/1 (March 2014), 83-92.
JAMA Corbet S. The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis. IJEFI. 2014;4:83–92.
MLA Corbet, Shaen. “The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis”. International Journal of Economics and Financial Issues, vol. 4, no. 1, 2014, pp. 83-92.
Vancouver Corbet S. The Contagion Effects of Sovereign Downgrades: Evidence from the European Financial Crisis. IJEFI. 2014;4(1):83-92.