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Has the Grexit news spilled over into euro area financial markets? The role of domestic political leaders, supranational executives and institutions

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  • Wildmer Daniel Gregori

    () (Prometeia Associazione (Italy))

  • Wildmer Agnese Sacchi

    () (Sapienza University of Rome (Italy) and Governance and Economics research Network (Spain))

Abstract

This paper investigates whether speculation about Greece.s exit from the euro has spilled over into other euro area countries. sovereign bond yields. Our empirical analysis is based on more than 64,000 news items on Grexit between December 2014 and October 2015, collected daily via the Factiva database. We can take account of Grexit news generally and, also, distinguish news items according to individual country press, domestic political leaders, supranational executives and institutions. Our results suggest that more news about Grexit drives up bond yields in European peripheral countries, but that there are no effects on European core countries. Thus, speculations about Grexit seem to be confined to more vulnerable economies. In addition, financial markets in peripheral countries react more to Grexit news associated to supranational executives and related institutions compared to news related to domestic politicians and European political bodies, due possibly to higher perceived credibility of the former with respect to the latter.

Suggested Citation

  • Wildmer Daniel Gregori & Wildmer Agnese Sacchi, 2016. "Has the Grexit news spilled over into euro area financial markets? The role of domestic political leaders, supranational executives and institutions," Mo.Fi.R. Working Papers 134, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:134
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    Keywords

    Grexit; Financial markets; Government bond; News; Spillovers; Euro area; GARCH.;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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