Menu Expand
  1. Journals
  2. Economics, Finance, Business & Management
  3. Zeitschrift für die gesamte Versicherungswissenschaft
  4. Vol. 112, Issue 2
  5. pp. 181–212

JOURNAL ARTICLE

Cite JOURNAL ARTICLE

Style
Meier, S., Gonzalez, M. Cointegration of EMU Government Bonds in Times of Financial Crises, COVID-19, and High Inflation – The Importance of Sovereign Debt for the European Insurance Industry. Zeitschrift für die gesamte Versicherungswissenschaft, 112(2), 181-212. https://doi.org/10.3790/zverswiss.2023.11.Meier.Rodriguez
Meier, Samira and Gonzalez, Miguel Rodriguez "Cointegration of EMU Government Bonds in Times of Financial Crises, COVID-19, and High Inflation – The Importance of Sovereign Debt for the European Insurance Industry" Zeitschrift für die gesamte Versicherungswissenschaft 112.2, 2023, 181-212. https://doi.org/10.3790/zverswiss.2023.11.Meier.Rodriguez
Meier, Samira/Gonzalez, Miguel Rodriguez (2023): Cointegration of EMU Government Bonds in Times of Financial Crises, COVID-19, and High Inflation – The Importance of Sovereign Debt for the European Insurance Industry, in: Zeitschrift für die gesamte Versicherungswissenschaft, vol. 112, iss. 2, 181-212, [online] https://doi.org/10.3790/zverswiss.2023.11.Meier.Rodriguez
Format
Download

Cointegration of EMU Government Bonds in Times of Financial Crises, COVID-19, and High Inflation – The Importance of Sovereign Debt for the European Insurance Industry

Meier, Samira | Gonzalez, Miguel Rodriguez

Zeitschrift für die gesamte Versicherungswissenschaft, Vol. 112 (2023), Iss. 2 : pp. 181–212

1 Citations (CrossRef)

Read Now Download (PDF)

Additional Information

Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/zverswiss.2023.11.Meier.Rodriguez
Language
German
Pages
32
Keywords

Author Details

Mendel University in Brno, Zemědělská 1665, 61300 Brno-sever-Černá Pole, Czech Republic.

Leibniz University Hannover, Otto-Brenner-Straße 7, 30159 Hannover, Germany. Corresponding Author.

Cited By

  1. German Government Bond Yields During the COVID-19 Pandemic: Some Thoughts About Monetary Policy and the Term Premium

    Schwarzbach, Christoph

    Klippstein, Anna

    Tholl, Johannes

    Basse, Tobias

    Zeitschrift für die gesamte Versicherungswissenschaft, Vol. 112 (2023), Iss. 4 P.369

    https://doi.org/10.3790/zverswiss.2023.1430001 [Citations: 0]

References

  1. Afonso, A./Jalles, J. T./Kazemi, M., 2020. The Effects of Macroeconomic, Fiscal and Monetary Policy Announcements on Sovereign Bond Spreads. International Review of Law and Economics 63, 105924.  Google Scholar
  2. BaFin, 2016. Government bonds: Treatment of risk under Solvency II. https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Fachartikel/2016/fa_bj_1607_staatsanleihen.html.  Google Scholar
  3. Basse, T., 2014. Searching for the EMU Core Member Countries. European Journal of Political Economy 34, S32–S39.  Google Scholar
  4. Basse, T., 2020. Solvency II and Sovereign Credit Risk: Additional Empirical Evidence and some Thoughts about Implications for Regulators and Lawmakers. International Review of Law and Economics 64, 105933.  Google Scholar
  5. Basse, T./Friedrich, M./Kleffner, A., 2012. Italian Government Debt and Sovereign Credit Risk: An Empirical Exploration and some Thoughts about Consequences for European Insurers. Zeitschrift für die gesamte Versicherungswissenschaft 101, 571–579.  Google Scholar
  6. Basse, T./Reddemann, S./Rodriguez Gonzalez, M., 2022. Dividend Signaling or Dividend Smoothing? New Empirical Evidence from the Italian Insurance Industry after the Global Financial Crisis. Zeitschrift für die gesamte Versicherungswissenschaft 111, 473–494.  Google Scholar
  7. Basse, T./Wegener, C., 2022. Inflation Expectations: Australian Consumer Survey Data versus the Bond Market. Journal of Economic Behavior & Organization 203, 416–430.  Google Scholar
  8. Bierens, H. J., 1997. Nonparametric Cointegration Analysis. Journal of Econometrics 77, 379–404.  Google Scholar
  9. Breitung, J., 2002. Nonparametric Tests for Unit Roots and Cointegration. Journal of Econo-metrics 108, 343–363.  Google Scholar
  10. Chang, T./Caudill, S. B., 2006. A Note on the Long-Run benefits from International Equity Diversification for a Taiwan Investor Diversifying in the US Equity Market. International Review of Financial Analysis 15, 57–67.  Google Scholar
  11. Dale, S./Haldane, A. G., 1995. Interest Rates and the Channels of Monetary Ttransmission: Some Sectoral Estimates. European Economic Review 39, 1611–1626.  Google Scholar
  12. Davidson, R./MacKinnon, J. G., et al., 1993. Estimation and Inference in Econometrics, vol. 63. Oxford New York.  Google Scholar
  13. Dickey, D. A./Fuller, W. A., 1979. Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American Statistical Association 74, 427–431.  Google Scholar
  14. Dickey, D. A./Fuller, W. A., 1981. Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica: Journal of the Econometric Society pp. 1057–1072.  Google Scholar
  15. Doff, R., 2016. The Final Solvency II Framework: Will it be Effective? The Geneva Papers on Risk and Insurance-Issues and Practice 41, 587–607.  Google Scholar
  16. Düll, R./König, F./Ohls, J., 2017. On the Exposure of Insurance Companies to Sovereign Risk—Portfolio Investments and Market Forces. Journal of Financial Stability 31, 93–106.  Google Scholar
  17. Dungey, M./Gajurel, D., 2015. Contagion and Banking Crisis – International Evidence for 2007–2009. Journal of Banking & Finance 60, 271–283.  Google Scholar
  18. EFAMA, 2022. European Fund and Asset Management Association Asset Management Report 2022. https://www.efama.org/newsroom/news/efama-asset-management-report-2022.  Google Scholar
  19. Eiopa, 2022. Insurance Statistics. https://register.eiopa.europa.eu/_layouts/15/ download.aspx?SourceUrl=https://register.eiopa.europa.eu/Publications/ Insurance%20Statistics/SQ_Exposures.xlsx.  Google Scholar
  20. Elderfield, M., 2009. Solvency II: Setting the Pace for Regulatory Change. The Geneva Papers on Risk and Insurance-Issues and Practice 34, 35–41.  Google Scholar
  21. Eling, M., Schmeiser, H., 2010. Insurance and the Credit Crisis: Impact and Ten Consequences for Risk Management and Supervision. The Geneva Papers on Risk and Insurance – Issues and Practice 35, 9–34.  Google Scholar
  22. Engle, R. F./Granger, C. W., 1987. Co-integration and Error Correction: Representation, Estimation, and Testing. Econometrica: Journal of the Econometric Society pp. 251–276.  Google Scholar
  23. Eurostat, 2022. HICP – monthly data (annual rate of change). https://ec.europa. eu/eurostat/databrowser/view/PRC_HICP_MANR custom_4117827/default/table? lang=en.  Google Scholar
  24. Fuller, W., 1976. Introduction to Statistical Time Series. New York, NY (USA) Wiley.  Google Scholar
  25. Gatzert, N./Wesker, H., 2012. A Comparative Assessment of Basel II/III and Solvency II. The Geneva Papers on Risk and Insurance – Issues and Practice 37, 539–570.  Google Scholar
  26. Gründl, H./Gal, J., 2013. Own Risk and Solvency Assessment within the Solvency II Framework and its Interplay with the Quantitative Solvency Capital Requirements. Tech. rep., SAFE Policy Letter No. 11.  Google Scholar
  27. Gruppe, M./Basse, T./Friedrich, M./Lange, C., 2017. Interest Rate Convergence, Sovereign Credit Risk and the European Debt Crisis: A Survey. The Journal of Risk Finance .  Google Scholar
  28. Johansen, S., 1988. Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control 12, 231–254.  Google Scholar
  29. Johansen, S., 1991. Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models. Econometrica: Journal of the Econometric Society pp.1551–1580.  Google Scholar
  30. Johansen, S., 1994. The Role of the Constant and Linear Terms in Cointegration Analysis of Nonstationary Variables. Econometric Reviews 13, 205–229.  Google Scholar
  31. Johansen, S./Juselius, K., 1990. Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money. Oxford Bulletin of Economics and Statistics 52, 169–210.  Google Scholar
  32. Jones, O., 2014. Solvency II: The Journey so far. Solvency II Handbook: Practical Approaches to Implementation pp. 7–26.  Google Scholar
  33. Kunze, F./Basse, T./Rodriguez Gonzalez, M./Vornholz, G., 2020. Forward-Looking Financial Risk Management and the Housing Market in the United Kingdom: Is there a Role for Sentiment Indicators? The Journal of Risk Finance 21, 659–678.  Google Scholar
  34. Lindberg, D. L./Seifert, D. L., 2015. Risk Management in the Insurance Industry: A Comparison of Solvency II to US Insurance Regulations. Journal of Insurance Issues pp. 233–243.  Google Scholar
  35. Liow, K. H., 2008. Financial Crisis and Asian Real Estate Securities Market Interdependence: Some Additional Evidence. Journal of Property Research 25, 127–155.  Google Scholar
  36. Ludwig, A., 2014. Credit Risk-Free Sovereign Bonds under Solvency II: A Cointegration Analysis with Consistently Estimated Structural Breaks. Applied Financial Economics 24, 811–823.  Google Scholar
  37. Marović, B./Njegomir, V./Maksimović, R., 2010. The Implications of the Financial Crisis to the Insurance Industry – Global and Regional Perspective. Economic research-Ekonomska istrazivanja 23, 127–141.  Google Scholar
  38. Meier, S./Gonzalez, M. R./Kunze, F., 2021. The Global Financial Crisis, the EMU Sovereign Debt Crisis and International Financial Regulation: Lessons from a Systematic Literature Review. International Review of Law and Economics 65, 105945.  Google Scholar
  39. Murray, M. P., 1994. A Drunk and her Dog: An Illustration of Cointegration and Error Correction. The American Statistician 48, 37–39.  Google Scholar
  40. Peleckienė, V./Peleckis, K., 2014. Omnibus II Effective Measures in Adjusting the Current Solvency II Framework. Procedia – Social and Behavioral Sciences 110, 156–163.  Google Scholar
  41. Quaglia, L., 2011. The Politics of Insurance Regulation and Supervision Reform in the  Google Scholar
  42. European Union. Comparative European Politics 9, 100–122.  Google Scholar
  43. Rodriguez Gonzalez, M./Basse, T./Tholl, J., 2019. Interest Rate Differentials and Monetary Policy in the European Monetary Union: The Case of 10 and 30 Year Bonds. Zeitschrift für die gesamte Versicherungswissenschaft 108, 19–42.  Google Scholar
  44. Rodriguez Gonzalez, M./Kunze, F./Schwarzbach, C./Dieng, C., 2017. Asset Liability Management and the Euro Crisis: Sovereign Credit Risk as a Challenge for the German Life Insurance Industry. The Journal of Risk Finance .  Google Scholar
  45. Rodriguez Gonzalez, M./Wegener, C./Basse, T., 2022. Re-Investigating the Insurance- Growth Nexus Using Common Factors. Finance Research Letters 46.  Google Scholar
  46. Said, S. E./Dickey, D. A., 1984. Testing for Unit Roots in Autoregressive-Moving Average Models of Unknown Order. Biometrika 71, 599–607.  Google Scholar
  47. Sarno, L./Thornton, D. L./Valente, G., 2007. The Empirical Failure of the Expectations Hypothesis of the Term Structure of Bond Yields. Journal of Financial and Quantitative Analysis 42, 81–100.  Google Scholar
  48. Sibbertsen, P./Wegener, C./Basse, T., 2014. Testing for a Break in the Persistence in Yield Spreads of EMU Government Bonds. Journal of Banking & Finance 41, 109–118.  Google Scholar
  49. Tholl, J./Basse, T./Meier, S./Rodriguez Gonzalez, M., 2021. Risk Premia and the European Government Bond Market: New Empirical Evidence and some Thoughts from the Perspective of the Life Insurance Industry. Zeitschrift für die gesamte Versicherungswissenschaft 110, 49–78.  Google Scholar
  50. Van Hulle, K., 2011. Solvency II: State of Play and Perspectives. Zeitschrift für die gesamte Versicherungswissenschaft 100, 177–192.  Google Scholar
  51. Wagner, J., 2014. A Note on the Appropriate Choice of Risk Measures in the Solvency Assessment of Insurance Companies. The Journal of Risk Finance 15.  Google Scholar
  52. ˇ  Google Scholar
  53. ˇ  Google Scholar

Abstract

This paper is an empirical investigation of the long-term relationship between the yields of 10y sovereign bonds of Germany and ten European Monetary Union (EMU) member countries before, after, and during the most important financial and economic events since the Global Financial Crisis. Further, we investigate the long-term relationship of EMU bond yields in the most recent period of high inflation. We analyze daily 10y sovereign bond yields for both, sample and sub-samples, by implementing the Johansen parametric standard approach in cointegration testing in combination with two non-parametric test procedures suggested by Bierens (1997) and Breitung (2002), which are not dependent on nuisance parameters. The results indicate that there is strong evidence for cointegrating relationships in the sovereign bond yields in core and non-core Eurozone countries in the early period of the EMU. However, contradictory evidence is found in the sub-samples following the European Sovereign Debt Crisis, as well as in the more recent period of sharp increases in inflation which is experienced globally. The findings are especially relevant for the asset management of European insurance companies, predominantly with regard to the treatment of EMU sovereign debt within the European regulatory framework, namely the Solvency II Directive.

Table of Contents

Section Title Page Action Price
Samira Meier / Miguel Rodriguez Gonzalez: Cointegration of EMU Government Bonds in Times of Financial Crises, COVID-19, and High Inflation – The Importance of Sovereign Debt for the European Insurance Industry 181
Abstract 181
Zusammenfassung 181
1. Introduction 182
2. The Importance of EMU Government Bonds for the European Insurance Industry 184
3. Regulatory Features of Government Bonds under the Solvency II Directive 187
4. Data and Methodology 191
5. Empirical Evidence 197
ADF Unit Root Tests 198
Breitung Unit Root Tests: 198
Johansen Cointegration Tests 199
Bierens Cointegration Tests: 200
Breitung Cointegration Tests: 200
6. Conclusion 208
References 209

Contact

Duncker & Humblot GmbH Carl-Heinrich-Becker-Weg 9 12165 Berlin, Deutschland T: +49 30 790006-0

Quick Navigation

2024 Duncker & Humblot GmbH

Powered by CloudPublish

We use cookies to ensure that you get the best experience on our website. Learn more about how we use cookies.