Contagion in EMU government bond markets An analysis of the periphery

This thesis provides an analysis on the impact of contagion on the government bond markets of the countries belonging to the EMU periphery. The main finding of the thesis is that the literature so far did not take into account two things sufficiently. First, the presence of unit roots in variables which means that in regression specifications in levels the case of spurious regression cannot be ruled out. Second, the poolability assumption does not seem to hold for the periphery. Separating the periphery sample into a Spain & Italy sample and a Ireland & Portugal sample shows that the government bond yield spreads of the different samples respond in a different way on the different independent variables which means that the homogeneity assumption does not hold. Taking these factors into account shows that there is very limited evidence for a wake-up-call contagion effect and strong evidence for a shift contagion effect in the Spain & Italy sample during the European sovereign debt crisis.