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Besides, without exception, the marginal effects of sovereign spread drivers (specifically, the variables that measure global market sentiment) increased during the crisis compared to the pre-crisis period, especially in peripheral countries. This paper reconsiders the effects of fiscal policy on long term interest rates and sovereign spreads employing a Factor http://palebluedotdesigns.com/platforma-inwestycyjna/ Augmented Panel (FAP) to control for the presence of common unobservable factors. We construct a real-time dataset of macroeconomic and fiscal variables for a panel of OECD countries for the period . We find that two global factors -the global monetary and fiscal policy stances -explain more than 60% of the variance in the long term interest rates.

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This approach is aimed at seizing the marginal effect of banking regulation on the impact of the respective factors of the crisis. The choice of the time sample is aimed at capturing the developments in the economic cycle preceding the crisis, which affected the performance of EU economies during the downturn of . The results point to a significant role of banking regulatory features in shaping the performance of EU countries as well as to their mitigating effect on the factors driving the latest financial crisis.

Our sample period begins in 2004, after a period of calm and tranquillity, and ends in 2009, with a significant widening of sovereign bond spreads. However, the impact of the financial and economic crisis has been much more harmful for EMU members’ sovereign bond markets, since it has prompted an important backward step in their integration process. We empirically investigate the determinants of EMU sovereign bond yield spreads with respect to the German bund.

The same two global factors play a relevant role also in explaining the variance of sovereign spreads, which in addition respond to global risk aversion. With respect to standard estimation techniques the use of the FAP reduces the importance of domestic fiscal variables in explaining long term interest rates, while it emphasizes their importance in explaining sovereign spreads. Using the FAP framework we also https://www.bing.com/search?q=bookkeeping&go=Поиск&qs=n&form=QBRE&sp=-1&pq=bookkeeping&sc=5-11&sk=&cvid=4C6F1478E53347A29CEC05BDE209BF5F analyse the cross country differences in the propagation of a shock to global fiscal stance and global risk aversion. We find the effects of the former to be modest in large economies and strong in economies characterized by low initial financial integration. Changes in risk perception, instead, are found to lead to higher spreads in countries with a high stock of public debt and weaker political institutions.

Prior to the sovereign debt crisis, investors appear to focus mainly on the global risk-aversion factors. However, during the sovereign credit crisis only fiscal factors appear to affect the credit spreads while international risk factors have had little or no impact on the sovereign credit spreads. This paper proposes a new model for capturing discontinuities in the underlying financial environment that can lead to abrupt falls, but not necessarily sustained monotonic falls, in asset prices. This notion of price dynamics is consistent with existing understanding of market crashes, which allows for a mix of market responses that are not universally negative.

The Franc as an investment currency

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  • Moreover, the author considers house price growth, public debt levels, financial openness and the extent of private credit as basic factors determining the vulnerability of EU countries to the crisis.
  • The study considers the level of output, the yearly averages of the month-to-month government bond yield spreads, and the yearly variance of these spreads as performance measures.
  • The article investigates the role of a broad array of banking regulatory features in shaping the resilience of European Union countries to the latest financial crisis.

Finally, we find that sovereign credit ratings are statistically significant in explaining spreads, yet compared to macro- and fiscal fundamentals their role is limited. Bond market integration clearly changes in response to economic and financial conditions, since the level of risk kryzys finansowy aversion changes and investors require time-varying compensation for accepting a risky payoff from financial assets. In this paper we examine the dynamic behaviour of European Government bond market integration using an asset pricing model based on that of Bekaert and Harvey ().

Overall our results are consistent with the evidence coming from the ongoing crisis. The article provides evidence of the key determinants of the sovereign credit spreads by including some unique variables which proxy credit risk, country-specific risk, and international risk https://ru.wikipedia.org/wiki/%D0%92%D0%B0%D0%BB%D1%8E%D1%82%D0%BD%D1%8B%D0%B9_%D1%80%D1%8B%D0%BD%D0%BE%D0%BA for 10 European Monetary Union (EMU) member countries. The findings suggest that though both country-specific and global risk factors significantly influence the sovereign yield spreads, the primary balance and not the forecast deficit is a key factor of credit spreads.

Crisis in the Eurozone

The article investigates the role of a broad array of banking regulatory features in shaping the resilience of European Union countries to the latest financial crisis. The study considers the level of output, the yearly averages of the month-to-month government bond yield spreads, and the yearly variance of these spreads as performance measures. Moreover, the author considers house price growth, public debt levels, financial openness and the extent of private credit as basic factors determining the vulnerability of EU countries to the crisis. The empirical specification is based on dynamic panel data models, which are estimated using the Generalized Method of Moments (GMM). The basic regressions including the main predictors of the crisis are expanded to include interaction terms between banking regulatory measures and the specified predictors.

Yen soars on safe haven demand as stocks fall

We use a panel of euro area countries to assess the determinants of long-term sovereign bond yield spreads over the period 1999. We find that, unlike the period preceding the global financial crisis, European government bond yield spreads are well explained by macro- and fiscal fundamentals over the crisis period. We also find that the menu of macro and fiscal risks priced by markets has been significantly enriched since March 2009, including the risk of the crisis’ transmission among EMU member states, international risk and liquidity risk.

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The model may be interpreted as a martingale composed with a randomized drift process that is designed to capture various asymmetric drivers of market sentiment. In particular, the model https://accounting-services.net/ is capable of generating realistic patterns of price meltdowns and bond yield inflations that constitute major market reversals while not necessarily being always monotonic in form.

Using panel data techniques, we examine the role of a wide set of potential drivers. To our knowledge, this paper presents one of the most exhaustive compilations of the variables used in the literature to study the behaviour of sovereign yield spreads and, in particular, to gauge the effect on these spreads of changes in market sentiment and risk aversion. We https://www.youtube.com/results?search_query=%D0%BA%D1%80%D0%B8%D0%BF%D1%82%D0%BE+%D0%B1%D0%B8%D1%80%D0%B6%D0%B0 use a sample of both central and peripheral countries from January 1999 to December 2012 and assess whether there were significant changes after the outbreak of the euro area debt crisis. Our results suggest that the rise in sovereign risk in central countries can only be partially explained by the evolution of local macroeconomic variables in those countries.

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