This paper studies the reaction of the Euro's value against major currencies to sovereign rating announcements from Moody's, S&P and Fitch CRAs during the Eurozone debt crisis in 2010–2012 based on event study methodology combined with GARCH models. We also analyze how the yields of French, Italian, German and Spanish government long-term bonds were affected by CRA announcements. Our results reveal ...
This paper studies welfare effects of a soft borrowing constraint on sovereign debt. The constraint is modeled as a proportional fine per unit of debt in excess of a specified reference value, resembling features of the Stability and Growth Pact. Sovereign debt is the result of myopic fiscal policy. It reduces welfare in the absence of lump-sum taxes. The paper shows that the borrowing constraint enhances ...
The paper analyzes the integration of euro area sovereign bond markets during the European sovereign debt crisis. It tests for contagion (i.e., an intensification in the transmission of shocks across countries), fragmentation (a reduction in spillovers) and flight-to-quality patterns, exploiting the heteroskedasticity of intraday changes in bond yields for identification. The paper finds that euro ...
The European Central Bank (ECB) decided at its Council meeting in January to implement a comprehensive program to purchase bonds, including euro area government bonds. The purchases are intended to anchor the rate of inflation and inflation expectations at below but close to two percent again. Given the lack of experience with this unconventional monetary policy instrument, the ECB is venturing into ...
Auf ihrer Ratssitzung im Januar beschloss die Europäische Zentralbank (EZB) ein umfassendes Ankaufprogramm für Anleihen, insbesondere Staatsanleihen. Die Käufe sollen dazu dienen, die Inflationsrate und die Inflationserwartungen wieder bei knapp unter zwei Prozent zu verankern. Angesichts der nur geringen Erfahrungen mit diesem unkonventionellen geldpolitischen Instrument wagt sich die EZB damit auf ...