Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202291 
Year of Publication: 
2017
Series/Report no.: 
JRC Working Papers in Economics and Finance No. 2017/13
Publisher: 
Publications Office of the European Union, Luxembourg
Abstract: 
This paper investigates whether rumours about Greek exit from the euro area have spilled over into other European countries’ sovereign bond yields. Our empirical analysis is based on more than 64,000 daily news items on Grexit between December 2014 and October 2015. We build a Grexit intensity index based on the daily change of Grexit news items to capture policy uncertainty about the euro area break-up. Our results suggest that higher intensity of Grexit news drives up government bond yields in peripheral countries (Italy, Portugal, and Spain, excluding Ireland), but that there are no effects on core countries. The asymmetric reaction to Grexit news seems to support a more general ‘market-based fiscal disciplining’ mechanism at work in monetary unions.
Subjects: 
Grexit
financial markets
government bond
news
euro area
GARCH
JEL: 
E43
E62
G12
G14
Persistent Identifier of the first edition: 
ISBN: 
978-92-79-77072-2
Document Type: 
Working Paper

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