Connectedness in European government bonds: an empirical analysis

Abstract

In this thesis we propose to discuss and analyse the correlation between the spot rates of bonds of ten European countries (Portugal, Netherlands, Belgium, France, Italy, Germany, Spain, Finland, Ireland, Austria) for three different maturities (two, five and ten years). In order to achieve this we use the variance decomposition method already used in the works of Diebold and Yilmaz in the Journal of econometrics of 2014. The analysis consists o f two parts: a first, static, analysis that takes into account the entirety of the data set (monthly returns from 2000 to 2021) and a second, dynamic, analysis that takes into account a rolling window subset of the data. The goal of the thesis is to show which countries have a greater influence over the others within the sample and to study how the correlation changes over time through periods of stability and crises and what is the impact of the ECB policies on correlation.