Using xtbreak to study the impacts of European Central Bank announcements on sovereign borrowing

Natalia Poiatti
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Natalia Poiatti: Instituto de Relações Internacionais - USP

London Stata Conference 2021 from Stata Users Group

Abstract: This paper investigates how the announcements of the European Central Bank have impacted the cost of sovereign borrowing in central and peripheral European countries. Using the xtbreak command (Ditzen, Karavias and Westerlund, 2021) in Stata, we tested whether the variations of European sovereign spreads can be explained by economic fundamentals in a model that allows for two structural breaks: the first, when investors realized the fiscal sustainability of the EMU should be understood in a decentralized fashion, when the ECB announced it would not bail out Greece; the second, when the ECB realized the existence of the euro was in check and announced it would be able to financial assist the countries in financial trouble. We show that a model that allows for structural breaks after the ECB announcements can explain most of the variations in European sovereign spreads.

Date: 2021-09-12
New Economics Papers: this item is included in nep-cba, nep-eec, nep-isf, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:boc:usug21:11

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