Sovereign Spreads and Financial Market Behaviour before and during the Crisis
This paper aims at shedding some light on the mechanisms of pricing the EMU countries’ sovereign bonds in financial markets. Employing the Augmented Mean Group (AMG) estimator, we find that major changes have occurred in terms of variables underlying sovereign risk. Since 2009, macroeconomic and fis...
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| Format: | Article |
| Language: | English |
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Universidad de Huelva
2015-07-01
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| Series: | Revista de Economía Mundial |
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| Online Access: | https://www.uhu.es/publicaciones/ojs/index.php/REM/article/view/3926 |
| _version_ | 1827321829359878144 |
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| author | Pawel Gajewski |
| author_facet | Pawel Gajewski |
| author_sort | Pawel Gajewski |
| collection | DOAJ |
| description | This paper aims at shedding some light on the mechanisms of pricing the EMU countries’ sovereign bonds in financial markets. Employing the Augmented Mean Group (AMG) estimator, we find that major changes have occurred in terms of variables underlying sovereign risk. Since 2009, macroeconomic and fiscal fundamentals has started to play a more important role, but only those that capture domestic demand evolution. In contrast, price competitiveness seems less important. The second conclusion lies in reversed attitude towards banking sector imbalances, as compared to the earlier period. One of the problems addressed concerns the horizon of projected macroeconomic and fiscal variables taken into account. The paper presents some evidence that financial markets have become more myopic and started to rely on short-term forecasts, whilst they had tended to encompass longer-term forecast horizon before the crisis |
| first_indexed | 2024-04-25T01:13:52Z |
| format | Article |
| id | doaj.art-9b242d3573c84fafbee7f5ef7a6fdd08 |
| institution | Directory Open Access Journal |
| issn | 1576-0162 2340-4264 |
| language | English |
| last_indexed | 2024-04-25T01:13:52Z |
| publishDate | 2015-07-01 |
| publisher | Universidad de Huelva |
| record_format | Article |
| series | Revista de Economía Mundial |
| spelling | doaj.art-9b242d3573c84fafbee7f5ef7a6fdd082024-03-09T11:51:13ZengUniversidad de HuelvaRevista de Economía Mundial1576-01622340-42642015-07-014210.33776/rem.v0i42.3926Sovereign Spreads and Financial Market Behaviour before and during the CrisisPawel Gajewski0Faculty of Economics and Sociology, University of LodzThis paper aims at shedding some light on the mechanisms of pricing the EMU countries’ sovereign bonds in financial markets. Employing the Augmented Mean Group (AMG) estimator, we find that major changes have occurred in terms of variables underlying sovereign risk. Since 2009, macroeconomic and fiscal fundamentals has started to play a more important role, but only those that capture domestic demand evolution. In contrast, price competitiveness seems less important. The second conclusion lies in reversed attitude towards banking sector imbalances, as compared to the earlier period. One of the problems addressed concerns the horizon of projected macroeconomic and fiscal variables taken into account. The paper presents some evidence that financial markets have become more myopic and started to rely on short-term forecasts, whilst they had tended to encompass longer-term forecast horizon before the crisishttps://www.uhu.es/publicaciones/ojs/index.php/REM/article/view/3926financial crisisfiscal policyEMUpanel estimation |
| spellingShingle | Pawel Gajewski Sovereign Spreads and Financial Market Behaviour before and during the Crisis Revista de Economía Mundial financial crisis fiscal policy EMU panel estimation |
| title | Sovereign Spreads and Financial Market Behaviour before and during the Crisis |
| title_full | Sovereign Spreads and Financial Market Behaviour before and during the Crisis |
| title_fullStr | Sovereign Spreads and Financial Market Behaviour before and during the Crisis |
| title_full_unstemmed | Sovereign Spreads and Financial Market Behaviour before and during the Crisis |
| title_short | Sovereign Spreads and Financial Market Behaviour before and during the Crisis |
| title_sort | sovereign spreads and financial market behaviour before and during the crisis |
| topic | financial crisis fiscal policy EMU panel estimation |
| url | https://www.uhu.es/publicaciones/ojs/index.php/REM/article/view/3926 |
| work_keys_str_mv | AT pawelgajewski sovereignspreadsandfinancialmarketbehaviourbeforeandduringthecrisis |