Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/65760
Authors: 
Arghyrou, Michael G.
Kontonikas, Alexandros
Year of Publication: 
2010
Series/Report no.: 
Cardiff Economics Working Papers E2010/9
Abstract: 
We offer a detailed empirical investigation of the European sovereign debt crisis based on the theoretical model by Arghyrou and Tsoukalas (2010). We find evidence of a marked shift in market pricing behaviour from a 'convergence-trade' model before August 2007 to one driven by macro-fundamentals and international risk thereafter. The majority of EMU countries have experienced contagion from Greece. There is no evidence of significant speculation effects originating from CDS markets. Finally, the escalation of the Greek debt crisis since November 2009 is confirmed as the result of an unfavourable shift in country specific market expectations. Our findings highlight the necessity of structural, competitiveness-inducing reforms in periphery EMU countries and institutional reforms at the EMU level enhancing intra-EMU economic monitoring and policy co-ordination.
Subjects: 
euro-area
crisis
spreads
fundamentals
expectations
contagion
speculation
JEL: 
E43
E44
F30
G01
G12
Document Type: 
Working Paper

Files in This Item:
File
Size
864.11 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.