Putting the “C” into crisis: Contagion, correlations and copulas on EMU bond markets

•We examine contagion appetite among Greek and six EMU bond markets.•We employ a framework with two procedures, a volatility-spillover model and a time-varying copula model.•Contagion appetite exists across EMU bond markets based on excessive macroeconomic imbalances and risk perception/arbitrage appetites of international portfolios.

We investigate the contagion appetite generated by the current debt crisis in Greece by focusing on six European Monetary Union bond markets, namely the Netherlands, Germany, Italy, Spain, Portugal and France. We use a framework that contains two procedures, a spillover regime/switching model and a time-varying copula model. The empirical evidence confirms contagion appetite to European Monetary Union countries, which are prone to contagion, some because of their excessive macroeconomic imbalances and others because of the sovereign's risk perception and the arbitrage appetites of international bond portfolios; but not an overall contagion effect from the crisis country to all others.