A reflection of history: fluctuations in Greek sovereign risk between 1914 and 1929

Olga Christodoulaki, Haeran Cho and Piotr Fryzlewicz

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Time series of daily data for Greek sovereign risk have been compiled and analysed statistically to shed light on the way that historical events, including political and institutional changes, determined the creditworthiness of the Greek government on the London stock market from the start of the Great War until the Great Crash. No a priori important dates were specified. The Asia Minor campaign and its aftermath exerted a strongly negative impact on the value of Greek sovereign debt and as a result the risk premium increased rapidly. Statistical analysis shows that investors acted upon news of fiscal performance and public debt developments. Unforeseen political changes also influenced market participants’ expectations. By contrast, institutional innovations such as the adoption of the Gold Exchange Standard and the establishment of a central bank de novo did not result in any quantitative market response. However, stabilisation and the concomitant institutional reforms were gradually factored into the market price of Greek sovereign debt traded in London and as a result the creditworthiness of the Greek government steadily improved.

Keywords: sovereign risk; sovereign debt; financial markets; institutions; breakpoints (search for similar items in EconPapers)
JEL-codes: F34 F35 G14 G15 N24 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2011-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:38378

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