Title: On interdependence and shift contagion between core Euro Area refinancing conditions
Authors: Sebastian Mueller - Christian-Albrechts-University Kiel (Germany) [presenting]
Abstract: Changes in linkages between Euro Area (EA 12) country long-term bond yields since the introduction of the Euro in January 2001 are evaluated. These linkages are measured as instantaneous cross market transmissions in a structural vector autoregressive (SVAR) framework. Employing different consistent estimators for scale free linkages we access the qualitative and quantitative robustness of statistical identification in small samples based on unconditional as well as on conditional patterns of heteroscedasticity. We document interdependence, shifts and break-ups in structural relationships of core EA country government bond yields. Moreover, the relative importance of country specific news for the refinancing conditions of others are revealed. We test for changes in pricing rules in the Euro crisis and find the ECB announcement to buy and mutualize government debt was only partially effective in reestablishing pre crisis interdependencies.