TY - JOUR

T1 - Testing for a break in the persistence in yield spreads of EMU government bonds

AU - Sibbertsen, Philipp

AU - Wegener, Christoph

AU - Basse, Tobias

PY - 2014/4

Y1 - 2014/4

N2 - This study tests for a break in the persistence of EMU government bond yield spreads examining data from France, Italy and Spain and using German interest rates as a kind of benchmark. The results reported here provide evidence for breaks between 2006 and 2008. The persistence of the yield spreads against German government bonds has increased significantly after this period. This could be a sign of higher sovereign credit risk (and possibly even redenomination risk) caused by the debt crisis in the euro area. We find clear indications for non-stationary behavior after the breakpoints and empirical evidence for positive excess kurtosis and GARCH-effects when persistence increases.

AB - This study tests for a break in the persistence of EMU government bond yield spreads examining data from France, Italy and Spain and using German interest rates as a kind of benchmark. The results reported here provide evidence for breaks between 2006 and 2008. The persistence of the yield spreads against German government bonds has increased significantly after this period. This could be a sign of higher sovereign credit risk (and possibly even redenomination risk) caused by the debt crisis in the euro area. We find clear indications for non-stationary behavior after the breakpoints and empirical evidence for positive excess kurtosis and GARCH-effects when persistence increases.

KW - Changing persistence

KW - Fractional integration

KW - Testing uncovered interest parity

UR - http://www.scopus.com/inward/record.url?scp=84893393720&partnerID=8YFLogxK

U2 - 10.1016/j.jbankfin.2014.01.003

DO - 10.1016/j.jbankfin.2014.01.003

M3 - Journal articles

VL - 41

SP - 109

EP - 118

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

IS - 1

ER -