Expectations and Systemic Risk in EMU Government Bond Spreads
Paolo Canofari (),
Giancarlo Marini and
Giovanni Piersanti ()
No 2014/1, SEP Working Papers from LUISS School of European Political Economy
This paper explores the determinants of 10-years sovereign bond spreads over the German Bund benchmark in the Euro Zone from 2000 to 2013, relying on cross-country quarterly data panel analysis. The paper focal point is the role of contagion and euro break-up risks in widening the sovereign bond yield differentials among EU member countries. Using a novel synthetic index capable of monitoring the sustainability of currency unions, the paper finds that market expectations of a euro’s break up and contagion from Greece were fundamentals drivers of sovereign risk premia in peripheral countries.
Keywords: Monetary unions; speculative attacks; self-fulfilling expectations; multiple equilibria; shadow exchange rate; financial crisis; contagion; spreads; sovereign default risk; euro break up risk (search for similar items in EconPapers)
JEL-codes: C32 C33 E42 E44 E62 F31 F33 F41 G01 G12 H63 (search for similar items in EconPapers)
Pages: 48 pages
New Economics Papers: this item is included in nep-mac
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Journal Article: Expectations and systemic risk in EMU government bond spreads (2015)
Working Paper: Expectations and systemic risk in EMU government bond spreads (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:sepewp:2014_001
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