Money Market Integration and Sovereign CDS Spreads Dynamics in the New EU States
AbstractWhen the first phase of the crisis focused primarily on the interbank market volatility, the second phase spread on the instability of public finance. Although the overall stance of public finances of the new members is better than the old member countries, the differences within the new group are significant (from the performer Estonia to the laggard Hungary). Sovereign CDS spreads have become major variables focused on risks and expectations about the fiscal situation of different countries. In the paper we investigate, first, whether there is a link in the new member states (NMS) between the expectations about the condition of their public finances and the dynamics of money markets,including integration of national money markets with the euro area.....Our study confirm that the strong link between monetary and public finance risk as apart of total systemic risk increase during the crisis especially for currency boards regimes, when the link becomes stronger and pronounced. For the inflation targeting countries the link became weaker and less pronounced.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp1002.
Date of creation: 01 Oct 2010
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money markets; sovereign CDS spreads; EU enlargement; monetary regimes; financial crisis;
Other versions of this item:
- Petar Chobanov & Amine Lahiani & Nikolay Nenovsky, 2011. "Money Market Integration and Sovereign CDS Spreads Dynamics in the New EU States," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-30 (All new papers)
- NEP-CBA-2011-04-30 (Central Banking)
- NEP-EEC-2011-04-30 (European Economics)
- NEP-MAC-2011-04-30 (Macroeconomics)
- NEP-MON-2011-04-30 (Monetary Economics)
- NEP-TRA-2011-04-30 (Transition Economics)
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