The Econometrics of Redenomination Risk

Cherubini, Umberto

doi:10.2139/ssrn.3408534

Cited by 4 publications

(1 citation statement)

References 23 publications

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“…Finally, our analysis is related to papers that assess the possibility of contagion in financial markets across countries. Kremens (2019) and Cherubini (2019), for instance, start from the ISDA basis, i.e., the difference in the spreads on the 2014-and 2003clause CDS contracts (the latter contract includes the redenomination of debt as a default event; the former does not for G7 or OECD investment-grade sovereigns, see Section 3.2 for details), and develop more complex measures of redenomination risk for the period after the sovereign debt crisis. These two papers analyze the correlation between measures of redenomination risk and redenomination-free credit risk (captured by the spread of the 2003-clause CDS contract) across euro-zone countries and their correlation with sovereign bond yield or CDS spreads in the period 2014 onward.…”

Section: Related Literaturementioning

confidence: 99%

Populism, Political Risk and the Economy: Lessons from Italy

et al. 2020

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This paper studies the effects of political risk shocks in Italy during the 2013-2019 period that saw the rise to power of populist parties. We identify political and policy events that have implications for debt sustainability and Euro membership, and use changes in sovereign CDS spreads around those dates as an instrument for political risk shocks. Shocks associated with populism have adverse effects on domestic and international financial markets. These effects were moderated by European institutions and domestic constitutional constraints. Moreover, political risk shocks have a negative impact on the real domestic economy, although cushioned by an accommodating monetary policy.

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Section: Related Literaturementioning

confidence: 99%

Populism, Political Risk and the Economy: Lessons from Italy

et al. 2020

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Political Risk, Populism and the Economy

Balduzzi

Brancati

Brianti

et al. 2023

The Economic Journal

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We study the financial and real effects of political risk shocks for Italy, Spain, Ireland, Portugal, and Greece between 2008 and 2019. We build an instrument for these shocks using the changes of the sovereign yield spread around political and policy dates and estimate their effects in the context of Local Projection. We show that adverse political risk shocks have negative effects on domestic financial markets and in some countries generate spillovers on the spreads of other euro-zone economies. Moreover, in Italy populism-related political risk shocks have a larger effect on financial markets and they harm the real economy.

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Leaving a Mark on the Euro

Kremens

2018

SSRN Journal

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The Econometrics of Redenomination Risk

Cited by 4 publications

References 23 publications

Populism, Political Risk and the Economy: Lessons from Italy

Populism, Political Risk and the Economy: Lessons from Italy

Political Risk, Populism and the Economy

Leaving a Mark on the Euro

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