Contagion in the European Sovereign Debt Crisis / Brent Glover, Seth Richards-Shubik.

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Glover, Brent

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w20567.Publication details: Cambridge, Mass. National Bureau of Economic Research 2014.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We use a network model of credit risk to measure market expectations of the potential spillovers from a sovereign default. Specifically, we develop an empirical model, based on the recent theoretical literature on contagion in financial networks, and estimate it with data on sovereign credit default swap spreads and the detailed structure of financial linkages among thirteen European sovereigns from 2005 to 2011. Simulations from the estimated model show that a sovereign default generates only small spillovers to other sovereigns. These results imply that credit markets do not demand a significant premium for the interconnectedness of sovereign debt in Europe.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w20567 (Browse shelf(Opens below))	Not For Loan

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October 2014.

We use a network model of credit risk to measure market expectations of the potential spillovers from a sovereign default. Specifically, we develop an empirical model, based on the recent theoretical literature on contagion in financial networks, and estimate it with data on sovereign credit default swap spreads and the detailed structure of financial linkages among thirteen European sovereigns from 2005 to 2011. Simulations from the estimated model show that a sovereign default generates only small spillovers to other sovereigns. These results imply that credit markets do not demand a significant premium for the interconnectedness of sovereign debt in Europe.