Title:
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Regime-dependent sovereign risk pricing during the Euro Crisis
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Author:
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Delatte, Anne-Laure; Fouquau, Julien; Portes, Richard
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Abstract:
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Previous work has documented a greater sensitivity of long-term government bond yields to fundamentals in Euro area peripheral countries during the euro crisis, but we know little about the driver(s) of regime switches. Our estimates based on a panel smooth threshold regression model quantify and explain them: 1) investors have penalized a deterioration of fundamentals more strongly from 2010 to 2012; 2) the higher the bank credit risk, measured with the premium on credit derivatives, the higher the extra premium on fundamentals; 3) after ECB President Draghi's speech in July 2012, it took one year to restore the non crisis regime and suppress the extra premium. |
Abstract:
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The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396. |
Subject(s):
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-European sovereign crisis -Panel Smooth Transition Regression Models -CDS indices |
Rights:
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open access
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https://creativecommons.org/licenses/by/4.0/ |
Document type:
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Working paper |
Published by:
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Share:
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Uri:
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https://ddd.uab.cat/record/196722
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