The walking debt crisis

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The walking debt crisis. / Wegener, Christoph; Kruse, Robinson; Basse, Tobias.

In: Journal of Economic Behavior & Organization, Vol. 157, 2019, p. 382-402.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

Wegener, C, Kruse, R & Basse, T 2019, 'The walking debt crisis', Journal of Economic Behavior & Organization, vol. 157, pp. 382-402. https://doi.org/10.1016/j.jebo.2017.10.008

APA

Wegener, C., Kruse, R., & Basse, T. (2019). The walking debt crisis. Journal of Economic Behavior & Organization, 157, 382-402. https://doi.org/10.1016/j.jebo.2017.10.008

CBE

Wegener C, Kruse R, Basse T. 2019. The walking debt crisis. Journal of Economic Behavior & Organization. 157:382-402. https://doi.org/10.1016/j.jebo.2017.10.008

MLA

Wegener, Christoph, Robinson Kruse and Tobias Basse. "The walking debt crisis". Journal of Economic Behavior & Organization. 2019, 157. 382-402. https://doi.org/10.1016/j.jebo.2017.10.008

Vancouver

Wegener C, Kruse R, Basse T. The walking debt crisis. Journal of Economic Behavior & Organization. 2019;157:382-402. https://doi.org/10.1016/j.jebo.2017.10.008

Author

Wegener, Christoph ; Kruse, Robinson ; Basse, Tobias. / The walking debt crisis. In: Journal of Economic Behavior & Organization. 2019 ; Vol. 157. pp. 382-402.

Bibtex

@article{0d89e42506d142c6b98f78e000c67240,
title = "The walking debt crisis",
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.",
keywords = "Sovereign debt crisis, Sovereign credit risk, Subprime crisis, Bubbles, Explosive behavior, Bubble migration, INTEREST-RATE CONVERGENCE, UP-CALL CONTAGION, EXPLOSIVE BUBBLES, FINANCIAL CRISIS, LIMIT THEORY, SOVEREIGN, STOCK, RISK, IMBALANCES, EXUBERANCE",
author = "Christoph Wegener and Robinson Kruse and Tobias Basse",
year = "2019",
doi = "10.1016/j.jebo.2017.10.008",
language = "English",
volume = "157",
pages = "382--402",
journal = "Journal of Economic Behavior & Organization",
issn = "0167-2681",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - The walking debt crisis

AU - Wegener, Christoph

AU - Kruse, Robinson

AU - Basse, Tobias

PY - 2019

Y1 - 2019

N2 - 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.

AB - 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.

KW - Sovereign debt crisis

KW - Sovereign credit risk

KW - Subprime crisis

KW - Bubbles

KW - Explosive behavior

KW - Bubble migration

KW - INTEREST-RATE CONVERGENCE

KW - UP-CALL CONTAGION

KW - EXPLOSIVE BUBBLES

KW - FINANCIAL CRISIS

KW - LIMIT THEORY

KW - SOVEREIGN

KW - STOCK

KW - RISK

KW - IMBALANCES

KW - EXUBERANCE

U2 - 10.1016/j.jebo.2017.10.008

DO - 10.1016/j.jebo.2017.10.008

M3 - Journal article

VL - 157

SP - 382

EP - 402

JO - Journal of Economic Behavior & Organization

JF - Journal of Economic Behavior & Organization

SN - 0167-2681

ER -