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Money Market Integration and Sovereign CDS Spreads Dynamics in the New EU States

  • Petar Chobanov
  • Amine Lahiani
  • Nikolay Nenovsky

When 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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  • Marek Belka & Jens Thomsen & Kim Abildgren & Pietro Catte & Pietro Cova & Patrizio Pagano & Ignazio Visco & Petar Chobanov & Amine Lahiani & Nikolay Nenovsky & Cristina Badarau & Grégory Levieuge & To, 2011. "Monetary Policy after the Crisis," SUERF Studies, SUERF - The European Money and Finance Forum, number 2011/3 edited by Ernest Gnan, & Ryszard Kokoszczynski & Tomasz Łyziak & Robert McCauley.
  • This item is provided by SUERF - The European Money and Finance Forum in its series Chapters in SUERF Studies with number 65-5.
    Handle: RePEc:erf:erfssc:65-5
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    1. James D. Hamilton & Oscar Jorda, 2002. "A Model of the Federal Funds Rate Target," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1135-1167, October.
    2. J�nos Kornai, 2000. "What the Change of System from Socialism to Capitalism Does and Does Not Mean," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 27-42, Winter.
    3. Petar Chobanov & Nikolay Nenovsky, 2004. "Money Market Liquidity under Currency Board – Empirical Investigations for Bulgaria," William Davidson Institute Working Papers Series 2004-693, William Davidson Institute at the University of Michigan.
    4. Nikolay Nenovsky, 2009. "Monetary Regimes in Post-Communist Countries. Some Long-Term Reflections," Working paper series 12009en, Agency for Economic Analysis and Forecasting.
    5. Crespo Cuaresma, Jesus & Wojcik, Cezary, 2006. "Measuring monetary independence: Evidence from a group of new EU member countries," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 24-43, March.
    6. repec:cup:cbooks:9780521805254 is not listed on IDEAS
    7. Frankel, Jeffrey A., 2011. "Monetary Policy in Emerging Markets: A Survey," Scholarly Articles 4669671, Harvard Kennedy School of Government.
    8. Frankel, Jeffrey, 2010. "Monetary Policy in Emerging Markets," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 25, pages 1439-1520 Elsevier.
    9. Colombatto, Enrico, 2002. " Is There an Austrian Approach to Transition?," The Review of Austrian Economics, Springer, vol. 15(1), pages 61-74, January.
    10. Frank Packer & Chamaree Suthiphongchai, 2003. "Sovereign credit default swaps," BIS Quarterly Review, Bank for International Settlements, December.
    11. Jan Winiecki, 2004. "Determinants of catching up or falling behind: interaction of formal and informal institutions," Post-Communist Economies, Taylor & Francis Journals, vol. 16(2), pages 137-152.
    12. Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
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