Are European sovereign bond spreads in concordance with macroeconomic variables evolution?

M. TERESA SORROSAL-FORRADELLAS; LISANA B. MARTINEZ; ANTONIO TERCEÑO

KYBERNETES

EMERALD GROUP PUBLISHING LIMITED

Año: 2017 vol. 46 p. 85 - 101

0368-492X

Purpose: The last great financial crisis which arose in the middle of 2007 in United States produced contagion effects over others economies. The purpose of this paper is focused to analyze the evolution of a set of economic variables of 17 European countries since 1991 until 2013. Sovereign bond spreads are also considered in order to compare the incidence of the financial crisis over the economies considering macroeconomics fundamentals and fixed bonds.Design/methodology approach: Self-Organizing Maps (SOM) are used in order to achieve the purpose of the research. With this methodology it is possible to analyze the evolution of the macroeconomic fundamentals of each country, obtaining particular and general conclusions according to the position of each country in the SOM. Moreover, the countries are compared between them and with its respective sovereign bond spreads level for each year of analysis.Findings: The impact of the crisis is different between the countries analyzed. The belonging to the European Monetary Union is an interesting characteristic of some of the most affect economies.Research limitations / Implications: This research presents wide implications for the economies in order to control the most vulnerable economic variables in front of financial crisis in order to prevent contagion effect. The inclusion of more economic variables and countries could enhance the study.Originality/ Value: This research analyses the relationship between Macroeconomic variables and Sovereign bond spreads using an infrequent methodology. The results obtained are valuable because they highlight how the present crisis has differently affected the European countries.