European Government Bond Dynamics and Stability Policies: Taming Contagion Risks

Schwendner, Peter; Schüle, Martin; Ott, Thomas; Hillebrand, Martin

doi:10.2139/ssrn.2601651

Cited by 8 publications

(8 citation statements)

References 2 publications

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“…Our results are in line with those of Schwendner et al (2015) and Kiss et al (2019) as we also find that the EFSF/ESM played a significant role in decreasing periphery bond yields, at least what regards prompt market reactions. Our finding adds to the literature by demonstrating that the significant relationship can also be established when considering a broad set of EFSF/ESMrelated events (not only disbursements of bailout loans themselves).…”

Section: 3 Results and Discussionsupporting

confidence: 93%

“…Market sentiments then drastically changed in late 2009 when these intra-EMU imbalances were put under the spotlight (Giordano et al 2013;Schwendner et al 2015). Yields of the Mediterranean states and Ireland soared, not least because prospects of any bailout or fresh liquidity seemed totally uncertain.…”

Section: The European Stability Mechanism: Background Creation and Rmentioning

confidence: 99%

“…As it can be seen from the above, markets indeed pushed EMU leaders to adopt more farreaching bailout solutions amid a sustained euro area debt crisis. Schwendner et al (2015) argue that a consolidation in sovereign bond markets 3 can be attributed to the new rescue mechanisms. Similar conclusions are drawn by Kiss et al (2019) who find that EFSF/ESM loans contributed to the observed decline in yield premia in the aftermath of the euro crisis.…”

Section: The European Stability Mechanism: Background Creation and Rmentioning

confidence: 99%

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The evolution of European bailout arrangements and its impact on sovereign bond yields in the aftermath of the euro crisis

Boros

Sztanó

2021

SocEc

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The 2010–2012 euro crisis prompted a wave of institutional reforms in the European Economic and Monetary Union (EMU), and one of the most remarkable changes was the creation of a permanent bailout facility for troubled sovereigns. The birth of the European Stability Mechanism (ESM) in 2012 was preceded by harsh debates, reflecting a conflict between a German view of country-level responsibility and French-Italian calls for more risk sharing. These tensions have remained ever since, which was also highlighted by conflicts regarding the ESMs overhaul at the end of 2019. Concerns of Italy then drew attention to the fact that a wide range of issues prevented the community from finalizing the post-crisis structure of the eurozone. This paper focuses on the evolution of the EMU financial assistance framework up until the latest efforts for its reform. We analyse the impact of related policy announcements on changes in sovereign bond yields of Italy, Spain, Portugal and Ireland (i.e. the most vulnerable countries during the euro crisis). Our findings show that news on bailout arrangements significantly contributed to a contemporaneous moderation of periphery bond yields, especially in the case of shorter maturities. This result hints at the role of common facilities in supporting financial stability. To enhance this feature, a ‘package approach’ (i.e. multiple reforms together, as stressed by Italy) may well need to be considered. Such a broad perspective can help strengthen the euro area once the acute threat of the coronavirus pandemic is averted.

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Section: 3 Results and Discussionsupporting

confidence: 93%

Section: The European Stability Mechanism: Background Creation and Rmentioning

confidence: 99%

Section: The European Stability Mechanism: Background Creation and Rmentioning

confidence: 99%

See 1 more Smart Citation

The evolution of European bailout arrangements and its impact on sovereign bond yields in the aftermath of the euro crisis

Boros

Sztanó

2021

SocEc

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“…The importance of networks and their connectedness is well established in the academic literature (Minoiu et al, 2015;Anand et al, 2015;Gaffeo and Molinari, 2015;Halaj and Kok, 2015;Bargigli et al, 2015;Schwendner et al, 2015;Billio et al, 2012). However, empirically a range of approaches have been adopted which rely on a variety of assumptions and techniques.…”

Section: Introductionmentioning

confidence: 99%

Was a deterioration in ‘connectedness’ a leading indicator of the European sovereign debt crisis?

Hamill

Pantelous

et al. 2021

Journal of International Financial Markets, Institutions and Mo

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“…Still, bond yield data have the advantage that they are available over a much longer time span and a wider set of counterparties. For this reason, a number of authors have also used bond yield data to measure systemic sovereign debt risk; see for example Ang and Longstaff (2013) and Schwendner et al (2015).…”

Section: Introductionmentioning

confidence: 99%

Score-driven Systemic Risk Signaling for European Sovereign Bond Yields and CDS Spreads

Lange

Lucas

Siegmann

2017

Systemic Risk Tomography

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We compute joint sovereign default probabilities as coincident systemic risk indicators. Instead of commonly used CDS spreads, we use government bond yield data which provide a longer data history. We show that for the more recent sample period 2008-2015, joint default probabilities based on CDS and bond yield data yield similar results. For the period 1987-2008, only the bond yield data can be used to shed light on European sovereign systemic stress. We also show that simple averages of rolling pairwise correlations do not always yield intuitive systemic risk indicators.

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European Government Bond Dynamics and Stability Policies: Taming Contagion Risks

Cited by 8 publications

References 2 publications

The evolution of European bailout arrangements and its impact on sovereign bond yields in the aftermath of the euro crisis

The evolution of European bailout arrangements and its impact on sovereign bond yields in the aftermath of the euro crisis

Was a deterioration in ‘connectedness’ a leading indicator of the European sovereign debt crisis?

Score-driven Systemic Risk Signaling for European Sovereign Bond Yields and CDS Spreads

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