Hierarchical structure of the European countries based on debts as a percentage of GDP during the 2000–2011 period

Abstract

We investigate hierarchical structures of the European countries by using debt as a percentage of Gross Domestic Product (GDP) of the countries as they change over a certain period of time. We obtain the topological properties among the countries based on debt as a percentage of GDP of European countries over the period 2000-2011 by using the concept of hierarchical structure methods (minimal spanning tree, (MST) and hierarchical tree, (HT)). This period is also divided into two sub-periods related to 2004 enlargement of the European Union, namely 2000-2004 and 2005-2011, in order to test various time-window and observe the temporal evolution. The bootstrap techniques is applied to see a value of statistical reliability of the links of the MSTs and HTs. The clustering linkage procedure is also used to observe the cluster structure more clearly. From the structural topologies of these trees, we identify different clusters of countries according to their level of debts and economic ties. Our results show that by the debt crisis, the less and most affected Eurozone's economies are formed as a cluster with each other in the MSTs and hierarchical trees.

Sovereign public debt crisis in Europe. A network analysis

“…We study networks dynamics by means of sliding windows forward in time. We extend previous works on this issue (e. g., Kantar et al, 2014;Dias, 2012;Gilmore et al, 2010) by analysing the temporal stability of the debt-to-GDP network.…”

“…Also, in the supplementary text a brief description of these measures is provided. (Sokal and Michener, 1958;Kantar and Keskin, 2013;Kantar et al, 2014). Fig.…”

“…Recently, a few papers have focused on the European debt crisis by analysing the dynamics of daily government bond yields (e. g., Gilmore et al, 2010;Dias, 2013;Dias, 2012) and the network topology of the public debt itself (Kantar, et al, 2014). 1 Economic literature on different topics of the financial crisis and debt crisis is vast.…”

“…Dias (2012 and2013) uses maximum spanning trees to analyse the topological properties of government bond rates´ markets in different periods including the European debt crisis. In their paper, Kantar et al (2014) investigate hierarchical and topological structures by using the minimum spanning tree (MST) approach in public debt as a percentage of the gross domestic product from 2000 to 2011. These papers have shown that European countries have formed different clusters regarding the dynamics of their public debts during the global and financial current crisis.…”

“…These papers have shown that European countries have formed different clusters regarding the dynamics of their public debts during the global and financial current crisis. The most and the less affected countries form groups during the sovereign crisis but they do not do so before with respect to government bond yields (Kantar et al 2014;Dias, 2012;Gilmore et al, 2010). Especially the group of the most affected countries (the so called PIGS Portugal, Ireland, Greece and Spain) get closer in their government bond yields dynamics.…”