Sovereign debt and systemic risk in the eurozone
Résumé
The paper analyzes the eurozone crisis through the lens of a new systemic sovereign risk measure. This measure is built on countries' budgetary constraint and the Marginal Expected Shortfall (MES) estimated through a DCC-Garch model. We use daily data on government bonds yields and quarterly macroeconomic data over the period . Our measure, applied to the sovereign debt crisis of the euro area, captures countries' expected financing requirements in times of crisis. The results underline the most systemically important countries and their contribution to a potential system's default. Specifically, Italy and Greece are highlighted as the most systemically important countries in crisis times.