Measuring Connectedness of Euro Area Sovereign Risk

摘要: Abstract We introduce a method for measuring the default risk connectedness of euro zone sovereign states using credit swap (CDS) and bond data. The measure is based on an out-of-sample variance decomposition model forecast errors. Due to its predictive nature, it can respond crisis occurrences more quickly than common in-sample techniques. determine both CDS data in order obtain comprehensive picture system. find evidence that there are several observable factors drive difference between bonds, but sources still contain specific information spill-overs. In general, we identify countries impose system respective spill-over channels. Our empirical analysis covers years 2009–2014, such recovery paths exiting EU IMF financial assistance schemes responses ECB’s unconventional policy measures be analyzed.