Evidence presented in an International Monetary Fund paper published on Thursday shows financial shocks have a more severe impact on sovereign spreads when public debt-to-GDP ratios are high.

Ashoka Mody and Damiano Sandri, the paper's authors, look at the rise and dispersion of sovereign spreads to examine the emergence and escalation of financial tensions within the eurozone during the recent sovereign debt crisis. The authors show that after the introduction of the euro in January 1999, the