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European economic and monetary union sovereign debt markets

Author

Listed:
  • Sensoy, Ahmet
  • Hacihasanoglu, Erk
  • Rostom, Ahmed

Abstract

This paper focuses on developments in the European Economic and Monetary Union sovereign debt markets in the past decade. The ?rst part analyzes the integration and segmentation structure of the bond markets of the Economic and Monetary Union before and after the sovereign debt crisis, by introducing the novel concept of correlation-based stable networks. Accordingly, a fair integration is observed between the bond markets during the pre-crisis period. However, a strict segmentation emerges, separating the members struggling with debt problems and the ones with relatively strong ?scal performances during the sovereign debt turmoil. The segmentation structure is clearly visualized, revealing the potential paths for crisis and recovery transmission in the future. In the second part, the paper comments on the recent decreasing trend in Economic and Monetary Union member bond yields and their increasing degree of co-movement. Accordingly, the paper argues that these changes do not depend on the ?scal performances of the member countries, but depend on the illusion of quality that appeared with the Fed (U.S. Federal Reserve) tapering signals in early 2013.

Suggested Citation

  • Sensoy, Ahmet & Hacihasanoglu, Erk & Rostom, Ahmed, 2015. "European economic and monetary union sovereign debt markets," Policy Research Working Paper Series 7149, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7149
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    Cited by:

    1. Sensoy, Ahmet & Ozturk, Kevser & Hacihasanoglu, Erk & Tabak, Benjamin M., 2017. "Not all emerging markets are the same: A classification approach with correlation based networks," Journal of Financial Stability, Elsevier, vol. 33(C), pages 163-186.
    2. Wohlmann, Monika, 2015. "Finanzmarktintegration in Mittelosteuropa: Eine empirische Analyse der integrativen Wirkung des Euro," Arbeitspapiere der FOM 55, FOM Hochschule für Oekonomie & Management.
    3. Alice, Albonico & Alessia, Paccagnini & Patrizio, Tirelli, 2016. "PIIGS in the Euro Area. An Empirical DSGE Model," Working Papers 331, University of Milano-Bicocca, Department of Economics, revised 11 Mar 2016.

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    Keywords

    Debt Markets; Emerging Markets; Currencies and Exchange Rates; Financial Intermediation; Deposit Insurance;
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