This paper analyses the determinants of sovereign spreads in the euro area from January 2002 to May 2012. The objective is to disentangle the role of country-specific fundamentals, driven by fiscal and macroeconomic factors, from what is referred to as contagion. Following the existing empirical...

The recent Euro area crisis, which has originally been driven mainly by macroeconomic factors, has had a strong impact also on financial markets leading internationally to what is referred as contagion, that is co-movements among asset prices which have been excessive respect to fundamentals....