The Pricing Of Sovereign Risk And Contagion During The European Sovereign Debt Crisis
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The Pricing Of Sovereign Risk And Contagion During The European Sovereign Debt Crisis
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Author : John Beirne
language : en
Publisher:
Release Date : 2013
The Pricing Of Sovereign Risk And Contagion During The European Sovereign Debt Crisis written by John Beirne and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
The paper analyses the drivers of sovereign risk for 31 advanced and emerging economies during the European sovereign debt crisis. It shows that a deterioration in countries' fundamentals and fundamentals contagion - a sharp rise in the sensitivity of financial markets to fundamentals - are the main explanations for the rise in sovereign yield spreads and CDS spreads during the crisis, not only for euro area countries but globally. By contrast, regional spill overs and contagion have been less important, including for euro area countries. The paper also finds evidence for herding contagion - sharp, simultaneous increases in sovereign yields across countries - but this contagion has been concentrated in time and among a few markets. Finally, empirical models with economic fundamentals generally do a poor job in explaining sovereign risk in the pre-crisis period for European economies, suggesting that the market pricing of sovereign risk may not have been fully reflecting fundamentals prior to the crisis.
The European Sovereign Debt Crisis
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Author : Phoebus L. Athanassiou
language : en
Publisher: Routledge
Release Date : 2021-08-23
The European Sovereign Debt Crisis written by Phoebus L. Athanassiou and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-08-23 with Law categories.
The European Sovereign Debt Crisis: Breaking the Vicious Circle between Sovereigns and Banks explains why the euro area’s progress towards reining in the risks arising from the well-documented bi-directional financial contagion transmission mechanism that links sovereigns to commercial banks has been more prominent compared to the channel of contagion moving from banks to sovereigns. Providing an analysis of the legal and regulatory measures that Europe and the euro area have taken to mitigate the exposure of sovereigns to financial crises generated by commercial banks, this book draws attention to areas where improvements to the arsenal of tools hitherto introduced are either desirable or necessary. Chapters further explain – with recourse to economic and legal arguments – why the channel of contagion moving from sovereigns to commercial banks has proven harder to close, and explores ways in which progress could be made in the direction of closing it so as to avert the risk of future banking sector crises. This work provides essential reading for students, researchers and practitioners with an interest in sovereign debt crises and the euro-area banking system.
The European Sovereign Debt Crisis And Its Impacts On Financial Markets
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Author : Go Tamakoshi
language : en
Publisher: Routledge
Release Date : 2015-02-11
The European Sovereign Debt Crisis And Its Impacts On Financial Markets written by Go Tamakoshi and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-02-11 with Business & Economics categories.
The global financial crisis saw many Eurozone countries bearing excessive public debt. This led the government bond yields of some peripheral countries to rise sharply, resulting in the outbreak of the European sovereign debt crisis. The debt crisis is characterized by its immediate spread from Greece, the country of origin, to its neighbouring countries and the connection between the Eurozone banking sector and the public sector debt. Addressing these interesting features, this book sheds light on the impacts of the crisis on various financial markets in Europe. This book is among the first to conduct a thorough empirical analysis of the European sovereign debt crisis. It analyses, using advanced econometric methodologies, why the crisis escalated so prominently, having significant impacts on a wide range of financial markets, and was not just limited to government bond markets. The book also allows one to understand the consequences and the overall impact of such a debt crisis, enabling investors and policymakers to formulate diversification strategies, and create suitable regulatory frameworks.
Contagion Risks In The European Sovereign Debt Crisis
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Author : Alesia Kalbaska
language : en
Publisher:
Release Date : 2013
Contagion Risks In The European Sovereign Debt Crisis written by Alesia Kalbaska and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Sovereign Spreads
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Author : Miguel A. Segoviano Basurto
language : en
Publisher: International Monetary Fund
Release Date : 2010-05-01
Sovereign Spreads written by Miguel A. Segoviano Basurto and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-05-01 with Business & Economics categories.
Over the past year, euro area sovereign spreads have exhibited an unprecedented degree of volatility. This paper explores how much of these large movements reflected shifts in (i) global risk aversion (ii) country-specific risks, directly from worsening fundamentals, or indirectly from spillovers originating in other sovereigns. The analysis shows that earlier in the crisis, the surge in global risk aversion was a significant factor influencing sovereign spreads, while recently country-specific factors have started playing a more important role. The perceived source of contagion itself has changed: previously, it could be found among those sovereigns hit hard by the financial crisis, such as Austria, the Netherlands, and Ireland, whereas lately the countries putting pressure on euro area government bonds have been primarily Greece, Portugal, and Spain, as the emphasis has shifted towards short-term refinancing risk and long-term fiscal sustainability. The paper concludes that debt sustainability and appropriate management of sovereign balance sheets are necessary conditions for preventing sovereign risk from feeding back into broader financial stability concerns.
Credit Risk Contagion Before And During The Euro Area Sovereign Debt Crisis
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Author : Kristyna Ters
language : en
Publisher:
Release Date : 2016
Credit Risk Contagion Before And During The Euro Area Sovereign Debt Crisis written by Kristyna Ters and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We examine whether sovereign credit risk shocks emanating from the GIIPS countries had an effect on central European countries such as the Czech Republic, Hungary, Poland and Slovakia (the Visegrad group). In addition to the GIIPS and Visegrad group countries we als include Austria, France and Germany as control countries in our dataset. We analyse 30-minute intraday credit default swaps (CDS) data prior to the crisis period (2008-Oct. 2009) and during the crisis period (Oct. 2009-2011) which enables us to analyse changes in the dynamics of sovereign risk contagion between these two datasets. By using a panel VAR methodology we find rather comovement effects in the Visegrad group countries as they have been only marginally affected by the turmoil in the peripheral countries during the sovereign debt crisis. In contrast, we find strong contagion effects between the GIIPS countries in our sample. In addition, we study the effects of the four economic adjustment programmes by the Troika in the period from 2010 until 2011. Even though these bailouts have been essential for the GIIPS countries in terms of reducing contagion risk across the euro area, our analysis shows, that they did not have an effect for the Visegrad group countries.
Contagion In The European Sovereign Debt Crisis
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Author : Brent Glover
language : en
Publisher:
Release Date : 2014
Contagion In The European Sovereign Debt Crisis written by Brent Glover and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with Debts, Public categories.
We use a network model of credit risk to measure market expectations of the potential spillovers from a sovereign default. Specifically, we develop an empirical model, based on the recent theoretical literature on contagion in financial networks, and estimate it with data on sovereign credit default swap spreads and the detailed structure of financial linkages among thirteen European sovereigns from 2005 to 2011. Simulations from the estimated model show that a sovereign default generates only small spillovers to other sovereigns. These results imply that credit markets do not demand a significant premium for the interconnectedness of sovereign debt in Europe.
Whatever It Takes To Resolve The European Sovereign Debt Crisis Bond Pricing Regime Switches And Monetary Policy Effects
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Author : António Afonso
language : en
Publisher:
Release Date : 2017
Whatever It Takes To Resolve The European Sovereign Debt Crisis Bond Pricing Regime Switches And Monetary Policy Effects written by António Afonso and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
This paper investigates the role of unconventional monetary policy as a source of time-variation in the relationship between sovereign bond yield spreads and their fundamental determinants. Our results provide evidence of a new bond-pricing regime following the announcement of the Outright Monetary Transactions (OMT) programme in August 2012. This regime is characterised by a weakened link between spreads and fundamentals, but with higher spreads relative to the pre-crisis period and residual redenomination risk. We also find that unconventional monetary policy measures affect the pricing of sovereign risk not only directly, but also indirectly through changes in banking risk.
Reflections On The Greek Sovereign Debt Crisis
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Author : Aristidis Bitzenis
language : en
Publisher: Cambridge Scholars Publishing
Release Date : 2014-09-26
Reflections On The Greek Sovereign Debt Crisis written by Aristidis Bitzenis and has been published by Cambridge Scholars Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-09-26 with Political Science categories.
The euro was generally considered a success in its first decade. Nevertheless, the “unanticipated” financial crisis in the summer of 2007 has developed gradually into the worst global economic crisis in post-war economic history and a sovereign debt crisis, calling into question the endurance of positive externalities under the current form of European economic integration. The experience of double-dip recessions in the core of the euro-area and the occurrence of a deflationary spiral in its southern periphery brings into question the wisdom of fiscal consolidation via austerity in the adjustment programmes adopted to exit the crisis. They also put into doubt the adequacy and efficiency of the European Economic and Monetary Union’s core elements, its political instruments and macroeconomic assumptions, as can be seen in the role of the Stability and Growth Pact and the stance of the European Central Bank. The title of this collective volume refers to the country where the European sovereign debt crisis began, while its contents concentrate on the extent to which this crisis should be a national or a European concern. Moreover, the focus on Greece stimulates discussion about the neglected factor of the shadow economy and the potential to boost government revenue through its successful transfer to the formal economy. The chapters address the inefficiencies of both euro-area institutions and policies adopted to exit the current predicament. Experts from several disciplines review the literature and critically evaluate the existence of issues such as contagion effects, domino effects, deflationary spirals, institutional efficiency and the reality of the option to exit the euro-area.
The Transmission Of Euro Area Sovereign Risk Contagion
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Author : Kristyna Ters
language : en
Publisher:
Release Date : 2016
The Transmission Of Euro Area Sovereign Risk Contagion written by Kristyna Ters and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We examine the role of the CDS and bond markets during and before the recent euro area sovereign debt crisis as transmission channels for credit risk contagion between sovereign entities. We analyse an intraday dataset for GIIPS countries as well as for France and Germany. Our findings suggest that, prior to the crisis, the CDS and bond markets were similarly important in the transmission of sovereign risk contagion, but that the importance of the bond market waned during the crisis. We find flight-to-safety effects during the crisis period in the German bond market. By using an exogenous macroeconomic news shock, we can show that, during the crisis period, sovereign credit risk was not related to economic fundamentals but rather driven by the announcements of the economic adjustment programmes (EAP) as the magnitude of risk contagion spreading from the country under the EAP did strongly decrease following these announcements. Only after the enlargement of the European Financial Stability Facility in July 2011, we find a strong decrease of interlinkages and a stabilising effect on the joint credit risk contagion across all GIIPS countries.