We propose to adopt high-frequency DCC-MIDAS models to estimate high- and low-frequency correlations in the 10-year government bond spreads for Belgium, France, Italy, the Netherlands, and Spain relative to Germany, from June 1, 2007 to May 31, 2012. The high-frequency component, reflecting financial market conditions, is evaluated at 15-minute frequency, while the low-frequency component, fixed through a month, depends on country-specific macroeconomic conditions. We find strong links between spreads volatility and worsening macroeconomic fundamentals; in presence of similar macroeconomic fundamentals relative spreads move together; the increasing correlation in spreads during the burst of the sovereign debt crisis cannot be entirely ascribed to macroeconomic factors but rather to changes in market liquidity.

(2016). High- and low-frequency correlations in European government bond spreads and their macroeconomic drivers [journal article - articolo]. In JOURNAL OF FINANCIAL ECONOMETRICS. Retrieved from http://hdl.handle.net/10446/55101

High- and low-frequency correlations in European government bond spreads and their macroeconomic drivers

BOFFELLI, Simona;URGA, Giovanni
2016

Abstract

We propose to adopt high-frequency DCC-MIDAS models to estimate high- and low-frequency correlations in the 10-year government bond spreads for Belgium, France, Italy, the Netherlands, and Spain relative to Germany, from June 1, 2007 to May 31, 2012. The high-frequency component, reflecting financial market conditions, is evaluated at 15-minute frequency, while the low-frequency component, fixed through a month, depends on country-specific macroeconomic conditions. We find strong links between spreads volatility and worsening macroeconomic fundamentals; in presence of similar macroeconomic fundamentals relative spreads move together; the increasing correlation in spreads during the burst of the sovereign debt crisis cannot be entirely ascribed to macroeconomic factors but rather to changes in market liquidity.
articolo
Boffelli, Simona; Skintzi, Vasiliki D.; Urga, Giovanni
(2016). High- and low-frequency correlations in European government bond spreads and their macroeconomic drivers [journal article - articolo]. In JOURNAL OF FINANCIAL ECONOMETRICS. Retrieved from http://hdl.handle.net/10446/55101
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/55101
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