Study At Formation Mechanism And Financial Contagion Effect Of The European Sovereign Debt Crisis

The Greece debt crisis taken place at the end of2009greatly shocked the whole world. Now3years later, we still cannot see the end of the debt crisis. On the contrary, Because of the causes of contagion mechanism and the international capital, the Greece debt crisis swiftly evolved into the euro-zone periphery. Now, the Ireland、Italy、Spain、Portugal and Cyprus, also grew out of the financial crisis situation, facing a serious risk of Sovereign debt crisis.The European sovereign debt crisis, following the U.S. subprime mortgage crisis, has the most far-reaching impact on the world economy. The outbreak of a debt crisis in any country or region is an accumulative process. To study the reason and the contagion path will be useful to clarify the nature of the crisis, and to work out efficient policy for the smooth development of China’s economic. In order to analyze the between the European sovereign debt crisis and the U.S. subprime mortgage crisis, as well as the contagion among the PIIGS, this paper tries to make a comprehensive analysis and research sparing no effort.There has been many scholars have undertaken extensive research to address these issues since the European sovereign debt crisis outbreaks. Of course, part of scholars’ ideas can be proved correct and meaningful, while another part of scholars’ results could be totally wrong. Having seen a lot of literature, the author developed the basic structure of this paper as following.Firstly, in the introduction section, the author tries to clarify the research background, significance, methods and ideas, innovative points and deficiencies of this article. The focus of this section is to introduce the reason and the way to choose this topic.Secondly, in the literature review section, the author mainly saw a lot of foreign literature, to clarify the definitions, preconditions and channels of financial contagion effect, as well as the frequently-used empirical research methods.In order to get the general ideas about how to finish this paper, the author also reads some valuable domestic literature with the same topic. Especially, the author also targeted reading the limited literature about financial contagion effects of the European sovereign debt crisis so to get a preliminary understanding of the fact of the existence of financial contagion effects in the Europe debt crisis. In order to conduct a more comprehensive analysis based on predecessors’ ideas, this article extends a more stringent test of the assumptions of the model and tries to prove the existence of financial contagion effects during the sovereign debt crisis with measurement test.Thirdly, before the empirical analysis, this article opens up a new paragraph to introduce the causes of the European debt crisis And then at the empirical part, this article uses detailed econometric analysis to test why the other four countries experience crisis after the Greek and distinguish the order of contagion so to prove the existence of contagion effect.