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The impact of fiscal policy announcements by the Italian government on the sovereign spread: A comparative analysis

Matteo Falagiarda and Wildmer Daniel Gregori

European Journal of Political Economy, 2015, vol. 39, issue C, 288-304

Abstract: This paper attempts to evaluate the impact of fiscal policy announcements by the Italian government on the long-term sovereign bond spread of Italy relative to Germany. After collecting data on relevant fiscal policy announcements, we perform an econometric comparative analysis between the three administrations that followed one another during the period 2009–2013. The results indicate that only fiscal policy announcements made by members of Monti's cabinet had a significant impact on the Italian spread. We argue that these findings may be partly explained by a credibility gap between Monti's technocratic administration and Berlusconi's and Letta's governments.

Keywords: Fiscal policy announcements; Political communication; Sovereign debt crisis; Interest rate spread; GARCH models (search for similar items in EconPapers)
JEL-codes: E43 E62 G01 G12 (search for similar items in EconPapers)
Date: 2015
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