Rights statement: This is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, 46, 2016 DOI: 10.1016/j.irfa.2015.09.010
Accepted author manuscript, 851 KB, PDF document
Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License
Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Will the crisis “tear us apart”?
T2 - evidence from the EU
AU - Pappas, Vasileios
AU - Ingham, Hilary
AU - Izzeldin, Marwan
AU - Steele, Gerald
N1 - This is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, 46, 2016 DOI: 10.1016/j.irfa.2015.09.010
PY - 2016/7
Y1 - 2016/7
N2 - We examine the synchronisation of the European Union (EU) financial markets before and during the 2007 global financial crisis. We use an Asymmetric Dynamic Conditional Correlation (ADCC)-GARCH framework to control for the time-varying correlations and a Markov-Switching model to identify regime changes. Our sample considers 27 EU nations for the period 2000–2011. For each nation we formulate several characteristics of the crisis such as, synchronicity, duration and intensity measures. We find that the more recent EU members had a lagged entry to the crisis regime, were less adversely affected, show higher correlation between their stock markets and have their credit scores being revised more frequently relative to established EU members. We also find that higher levels of sovereign debt and lower levels of industrialisation positively impact crisis duration and intensity. Our results refute the notion of uniform integration of EU financial markets as evident from the highly non-synchronised observed crisis experience among the EU members. As such, one-size fits all policies are likely to be ineffective.
AB - We examine the synchronisation of the European Union (EU) financial markets before and during the 2007 global financial crisis. We use an Asymmetric Dynamic Conditional Correlation (ADCC)-GARCH framework to control for the time-varying correlations and a Markov-Switching model to identify regime changes. Our sample considers 27 EU nations for the period 2000–2011. For each nation we formulate several characteristics of the crisis such as, synchronicity, duration and intensity measures. We find that the more recent EU members had a lagged entry to the crisis regime, were less adversely affected, show higher correlation between their stock markets and have their credit scores being revised more frequently relative to established EU members. We also find that higher levels of sovereign debt and lower levels of industrialisation positively impact crisis duration and intensity. Our results refute the notion of uniform integration of EU financial markets as evident from the highly non-synchronised observed crisis experience among the EU members. As such, one-size fits all policies are likely to be ineffective.
KW - Contagion
KW - Global financial crisis
KW - Synchronisation
KW - Intensity
KW - Duration
KW - ADCC-GARCH
KW - European Union
U2 - 10.1016/j.irfa.2015.09.010
DO - 10.1016/j.irfa.2015.09.010
M3 - Journal article
VL - 46
SP - 346
EP - 360
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
SN - 1057-5219
ER -