Will the crisis “tear us apart”?:evidence from the EU

Pappas, Vasileios and Ingham, Hilary and Izzeldin, Marwan and Steele, Gerald (2016) Will the crisis “tear us apart”?:evidence from the EU. International Review of Financial Analysis, 46. pp. 346-360. ISSN 1057-5219

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Abstract

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.

Item Type:
Journal Article
Journal or Publication Title:
International Review of Financial Analysis
Additional Information:
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
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
76402
Deposited By:
Deposited On:
29 Oct 2015 09:46
Refereed?:
Yes
Published?:
Published
Last Modified:
27 Oct 2020 05:13