Stress factor contagion among EU countries

Abstract

In this paper we study contagion effect among the EU yields(Austria, Belgium, Greece, Germany, Finland, France, Ireland, Italy, Lithuania, Malta, Netherlands, Portugal, Slovakia, Spain and UK), over the period 1999:03-2014:12. We investigate if the fact of one country entering in a period of stress will that affect the other countries’ probability of also entering in stress period. We find that, on top of the variation of the global risk and liquidity, changes in the other countries’ stress indicator will also explain their stress.