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News Releases, Credit Rating Announcements, and Anti-Crisis Measures as Determinants of Sovereign Bond Spreads in the Peripheral Euro-Area Countries

Author

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  • Wojciech Grabowski

    (Department of Econometric Models and Forecasts, Faculty of Economics and Sociology, University of Lodz, Poland)

  • Ewa Stawasz-Grabowska

    (Department of International Economics, Faculty of Economics and Sociology, University of Lodz, Poland)

Abstract

This paper aims to contribute to the understanding of the determinants of the sovereign bond yields of the peripheral euro-area countries in recent years. We consider news releases, credit rating announcements, and anti-crisis measures undertaken by the ECB, for the EU/euro area as a whole as well as at the level of individual countries, as potential determinants. Our study is based on the daily sovereign bond spreads (with regard to German bunds) of Greece, Ireland, Italy, Portugal, and Spain in the years 2010-2016. We use the VARX-GARCH-BEKK model. Our results suggest that the spreads were most strongly influenced by the ECB’s measures and bailout programs, while the initiatives undertaken at the EU/euro area level played a less significant role. Rating changes proved to be significant, but some discrepancies with the results of previous studies occurred. Different sets of news variables were received for each country. Nonetheless, similarities were also identified.

Suggested Citation

  • Wojciech Grabowski & Ewa Stawasz-Grabowska, 2019. "News Releases, Credit Rating Announcements, and Anti-Crisis Measures as Determinants of Sovereign Bond Spreads in the Peripheral Euro-Area Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(2), pages 149-173, April.
    • Handle: RePEc:fau:fauart:v:69:y:2019:i:2:p:149-173
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    References listed on IDEAS

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    2. Wojciech Grabowski & Ewa Stawasz-Grabowska, 2021. "How have the European central bank’s monetary policies been affecting financial markets in CEE-3 countries?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 43-83, March.

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    More about this item

    Keywords

    sovereign bond yields; euro area crisis; VARX-GARCH-BEKK model;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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