Universität zu Köln

Wegener, Christoph ORCID: 0000-0002-9508-7131, Kruse, Robinson and Basse, Tobias (2019). The walking debt crisis. J. Econ. Behav. Organ., 157. S. 382 - 403. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 1879-1751

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Abstract

This article sheds light on the question whether arising sovereign credit risk in the EMU has been triggered by the US subprime crunch. By adapting recent econometric methodologies suggested in the related field of speculative bubbles, we find clear evidence for fast diverging (and even explosive) behavior of EMU government bond yields of peripheral countries relative to Germany during the financial and the European debt crisis. This might be caused by flight-to-quality effects to German government bonds coincident with the collapse of Lehman Brothers and by a loss of confidence in the fiscal stability of Greece, Ireland, Italy, Portugal and Spain during the European debt crisis. First, we find compelling evidence for bubbles in the Dow Jones Equity Real Estate Investment Trusts (REITs) index which serves as a weekly measure of economic activity in the North American real estate sector. Second, in our main analysis, we test whether the collapsing bubble in the housing market triggered the diverging government bond yields during two crisis regimes. Our findings indicate that this was the case in the course of the financial crisis, but not during the EMU sovereign debt crisis. These results suggest that the severe fiscal problems in peripheral countries are homemade rather than imported from the US. (C) 2017 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Wegener, Christoph UNSPECIFIED orcid.org/0000-0002-9508-7131 UNSPECIFIED Kruse, Robinson UNSPECIFIED UNSPECIFIED UNSPECIFIED Basse, Tobias UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-139099
DOI:	10.1016/j.jebo.2017.10.008
Journal or Publication Title:	J. Econ. Behav. Organ.
Volume:	157
Page Range:	S. 382 - 403
Date:	2019
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	1879-1751
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language INTEREST-RATE CONVERGENCE; UP-CALL CONTAGION; EXPLOSIVE BUBBLES; FINANCIAL CRISIS; LIMIT THEORY; SOVEREIGN; STOCK; RISK; IMBALANCES; EXUBERANCE Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/13909