2014
DOI: 10.1177/1465116514553487
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Austerity and credibility in the Eurozone

Abstract: During the euro crisis policy-makers tried to re-establish credibility with austere budgets. Studies of austerity have been plagued by measurement and endogeneity problems. We provide a direct test of the effect of austerity on confidence by calculating the immediate impact of austere budgets on government bonds. We build a unique database of budget dates and conduct event studies of 223 (future) Eurozone budgets. Since austere budgets are enacted in particular circumstances, we use a treatment effects design … Show more

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Cited by 14 publications
(11 citation statements)
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References 51 publications
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“…At the European level, we find strong and statistically significant effects for EU decisions and ECB statements, 13 but not for EU statements and ECB decisions. This is consistent with the expectation that EU statements are largely ignored by the market, whereas 12 For similar results, showing no positive effect of national efforts to reassure markets, see Büchel (2013); McMenamin et al (2015). 13 These results stand in notable contrast to those of Smeets and Zimmermann (2013).…”
Section: Resultssupporting
confidence: 70%
“…At the European level, we find strong and statistically significant effects for EU decisions and ECB statements, 13 but not for EU statements and ECB decisions. This is consistent with the expectation that EU statements are largely ignored by the market, whereas 12 For similar results, showing no positive effect of national efforts to reassure markets, see Büchel (2013); McMenamin et al (2015). 13 These results stand in notable contrast to those of Smeets and Zimmermann (2013).…”
Section: Resultssupporting
confidence: 70%
“…Of course, elections are not the only, or even the most important, political effect on financial markets. Budgets (McMenamin et al 2015) and government formation are two other processes that come to mind. However, the precise timing of public information release about these two is much harder to identify.…”
Section: Discussionmentioning
confidence: 99%
“…; McMenamin et al. ). Party ideology, coalitional politics and industrial relations are all important predictors for governments’ policy choices and reform capacity (Alexiadou ; Armingeon et al.…”
Section: Ministerial Appointments and Risk Of Reform Commitment Durinmentioning
confidence: 97%
“…During periods of monetary or fiscal/debt crises governments are pressured to enact economic reforms that directly affect and often hurt important constituencies and stakeholders. Policy responses to economic crises among others involve price stabilisation, fiscal consolidation, social welfare and labour market reforms (Armingeon et al 2016;McMenamin et al 2014). Party ideology, coalitional politics and industrial relations are all important predictors for governments' policy choices and reform capacity (Alexiadou 2013;Armingeon et al 2016;Iversen & Soskice 2015;Korpi & Palme 2003).…”
Section: Ministerial Appointments and Risk Of Reform Commitment Durinmentioning
confidence: 99%