Contagion spillovers between sovereign and financial European sector from a Delta CoVaR approach

  1. Javier Ojea Ferreiro 1
  1. 1 Universidad Complutense de Madrid

    Universidad Complutense de Madrid

    Madrid, España

    ROR 02p0gd045

Documentos de Trabajo (ICAE)

ISSN: 2341-2356

Year of publication: 2018

Issue: 12

Pages: 1-33

Type: Working paper

More publications in: Documentos de Trabajo (ICAE)


Índice Dialnet de Revistas

  • Year 2018
  • Journal Impact: 0.240
  • Field: ECONOMÍA Quartile: C2 Rank in field: 51/171


I examine the evolution of contagion indexes between the European Financial sector and the sovereign sector (Austria, Belgium, France, Germany, Italy, Netherlands and Spain) during the European sovereign credit crisis. Contagion indexes, ∆CoV aR and ∆CoES, reflect events associated with extreme left tail returns and interdependencies between defaults different than those observed in tranquil times. These measures reveal very useful information concerning risk management. I use a copula approach with time-varying parameters to capture changes in the tail dependence between returns in the financial and the sovereign sectors. I employ a Switching Markov model to identify the most stressful moments of the contagion indicators. The results point out the emergence of Greek debt crisis on March 2010 and the vulnerable situation of Spain and Italy in summer 2011 as the main periods where the contagion from the sovereign to the financial sector was stronger. The decrease in contagion was gradual since the speech made by the ECB on July 26th; 2012. The statistical significance of the change in the contagion indicators is checked using boostrap tests.

Funding information

I acknowledge financial support provided by the Spanish Ministry of Education under grant FPU15/04241.


  • Ministry of Education Spain
    • FPU15/042

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