IDEAS home Printed from https://ideas.repec.org/p/awi/wpaper/0536.html
   My bibliography  Save this paper

The Effect of Political Communication on European Financial Markets during the Sovereign Debt Crisis

Author

Listed:
  • Conrad, Christian
  • Zumbach, Klaus Ulrich

Abstract

We quantify all statements by major European politicians reported by Reuters during the August 2011 to December 2011 period and show that political communication significantly affects European stock and bond markets as well as the EUR-USD exchange rate. Communication with respect to Italy induces the strongest market reactions. Financial markets consider the German bondmarket a safe haven.

Suggested Citation

  • Conrad, Christian & Zumbach, Klaus Ulrich, 2012. "The Effect of Political Communication on European Financial Markets during the Sovereign Debt Crisis," Working Papers 0536, University of Heidelberg, Department of Economics.
    • Handle: RePEc:awi:wpaper:0536
    Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
    as

    Download full text from publisher

    File URL: http://nbn-resolving.de/urn/resolver.pl?urn=urn:nbn:de:bsz:16-heidok-142207
    File Function: Frontdoor page on HeiDOK
    Download Restriction: no
    File URL: https://archiv.ub.uni-heidelberg.de/volltextserver/14220/1/Conrad_Zumbach_2012_dp536.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Christian Conrad & Michael J. Lamla, 2010. "The High‐Frequency Response of the EUR‐USD Exchange Rate to ECB Communication," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1391-1417, October.
    2. Juha Kilponen & Helinä Laakkonen & Jouko Vilmunen, 2015. "Sovereign Risk, European Crisis-Resolution Policies, and Bond Spreads," International Journal of Central Banking, International Journal of Central Banking, vol. 11(2), pages 285-323, March.
    3. Beetsma, Roel & de Jong, Frank & Giuliodori, Massimo & Widijanto, Daniel, 2012. "Spread the News: How the Crisis Affected the Impact of News on the European Sovereign Bond Markets," CEPR Discussion Papers 9043, C.E.P.R. Discussion Papers.
    4. Michael Ehrmann & Marcel Fratzscher, 2007. "Communication by Central Bank Committee Members: Different Strategies, Same Effectiveness?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2‐3), pages 509-541, March.
    5. Ehrmann, Michael & Osbat, Chiara & Stráský, Jan & Uusküla, Lenno, 2014. "The euro exchange rate during the European sovereign debt crisis – Dancing to its own tune?," Journal of International Money and Finance, Elsevier, vol. 49(PB), pages 319-339.
    6. Almeida, Alvaro & Goodhart, Charles & Payne, Richard, 1998. "The Effects of Macroeconomic News on High Frequency Exchange Rate Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(3), pages 383-408, September.
    7. Beetsma, Roel & Giuliodori, Massimo & de Jong, Frank & Widijanto, Daniel, 2013. "Spread the news: The impact of news on the European sovereign bond markets during the crisis," Journal of International Money and Finance, Elsevier, vol. 34(C), pages 83-101.
    8. Dieter Smeets & Marco Zimmermann, 2013. "Did the EU Summits Succeed in Convincing the Markets during the Recent Crisis?," Journal of Common Market Studies, Wiley Blackwell, vol. 51(6), pages 1158-1177, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Julia Wolfinger & Lars P. Feld & Ekkehard A. Köhler & Tobias Thomas, 2018. "57 Channels (And Nothin On) - Does TV-News on the Eurozone Affect Government Bond Yield Spreads?," CESifo Working Paper Series 7437, CESifo.
    2. Li, Kun, 2018. "Reaction to news in the Chinese stock market: A study on Xiong’an New Area Strategy," Journal of Behavioral and Experimental Finance, Elsevier, vol. 19(C), pages 36-38.
    3. Clancy, Daragh & Gabriele, Carmine & Žigraiová, Diana, 2022. "Sovereign bond market spillovers from crisis-time developments in Greece," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    4. Hirsch, Patrick & Feld, Lars P. & Köhler, Ekkehard A. & Thomas, Tobias, 2024. "“Whatever It Takes!” How tonality of TV-news affected government bond yield spreads during the European debt crisis," European Journal of Political Economy, Elsevier, vol. 82(C).
    5. Conrad, Christian & Stuermer, Karin, 2017. "On the economic determinants of optimal stock-bond portfolios: international evidence," Working Papers 0636, University of Heidelberg, Department of Economics.
    6. Hirsch, Patrick & Köhler, Ekkehard A. & Feld, Lars P. & Thomas, Tobias, 2020. ""Whatever it takes!": How tonality of TV-news affects government bond yield spreads during crises," Freiburg Discussion Papers on Constitutional Economics 20/9, Walter Eucken Institut e.V..
    7. Philipp Mohl & Gilles Mourre & Sven Langedijk & Martijn Hoogeland, 2021. "Does Media Visibility Make EU Fiscal Rules More Effective?," European Economy - Discussion Papers 155, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ehrmann, Michael & Osbat, Chiara & Stráský, Jan & Uusküla, Lenno, 2014. "The euro exchange rate during the European sovereign debt crisis – Dancing to its own tune?," Journal of International Money and Finance, Elsevier, vol. 49(PB), pages 319-339.
    2. Andreas Haupenthal & Matthias Neuenkirch, 2017. "Grexit news and stock returns," Applied Economics, Taylor & Francis Journals, vol. 49(39), pages 3891-3898, August.
    3. Besma Hamdi & Sami Hammami, 2018. "The Crisis of Sovereign Debt in the Euro Zone: Effect on the Banking Sector," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(3), pages 822-832, September.
    4. Aakriti Mathur & Rajeswari Sengupta, 2019. "Analysing monetary policy statements of the Reserve Bank of India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-012, Indira Gandhi Institute of Development Research, Mumbai, India.
    5. Marc Anderes & Alexander Rathke & Sina Streicher & Jan-Egbert Sturm, 2021. "The role of ECB communication in guiding markets," Public Choice, Springer, vol. 186(3), pages 351-383, March.
    6. Christian Conrad & Michael J. Lamla, 2010. "The High-Frequency Response of the EUR-USD Exchange Rate to ECB Communication," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1391-1417, October.
    7. M. Falagiarda & W. D. Gregori, 2014. "Fiscal Policy Announcements of Italian Governments and Spread Reaction during the Sovereign Debt Crisis," Working Papers wp961, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. Istrefi, Klodiana & Odendahl, Florens & Sestieri, Giulia, 2023. "Fed communication on financial stability concerns and monetary policy decisions: Revelations from speeches," Journal of Banking & Finance, Elsevier, vol. 151(C).
    9. De Santis, Roberto A., 2020. "Impact of the Asset Purchase Programme on euro area government bond yields using market news," Economic Modelling, Elsevier, vol. 86(C), pages 192-209.
    10. Cyril May & Greg Farrell & Jannie Rossouw, 2018. "Do Monetary Policy Announcements Affect Exchange Rate Returns and Volatility of Returns? Some Evidence from High‐Frequency Intra‐Day South African Data," South African Journal of Economics, Economic Society of South Africa, vol. 86(3), pages 308-338, September.
    11. Picault, Matthieu & Renault, Thomas, 2017. "Words are not all created equal: A new measure of ECB communication," Journal of International Money and Finance, Elsevier, vol. 79(C), pages 136-156.
    12. Michael Frömmel & Norbert Kiss M. & Klára Pintér, 2011. "Macroeconomic announcements, communication and order flow on the Hungarian foreign exchange market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 16(2), pages 172-188, April.
    13. Falagiarda, Matteo & Gregori, Wildmer Daniel, 2015. "The impact of fiscal policy announcements by the Italian government on the sovereign spread: A comparative analysis," European Journal of Political Economy, Elsevier, vol. 39(C), pages 288-304.
    14. Clancy, Daragh & Gabriele, Carmine & Žigraiová, Diana, 2022. "Sovereign bond market spillovers from crisis-time developments in Greece," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    15. Hayo, Bernd & Henseler, Kai & Steffen Rapp, Marc & Zahner, Johannes, 2022. "Complexity of ECB communication and financial market trading," Journal of International Money and Finance, Elsevier, vol. 128(C).
    16. Beetsma, Roel & de Jong, Frank & Giuliodori, Massimo & Widijanto, Daniel, 2017. "Realized (co)variances of eurozone sovereign yields during the crisis: The impact of news and the Securities Markets Programme," Journal of International Money and Finance, Elsevier, vol. 75(C), pages 14-31.
    17. Klodiana Istrefi & Florens Odendahl & Giulia Sestieri, 2022. "ECB Communication and its Impact on Financial Markets," Working papers 859, Banque de France.
    18. Consoli, Sergio & Pezzoli, Luca Tiozzo & Tosetti, Elisa, 2021. "Emotions in macroeconomic news and their impact on the European bond market," Journal of International Money and Finance, Elsevier, vol. 118(C).
    19. Wolfinger, Julia & Köhler, Ekkehard A. & Feld, Lars P. & Thomas, Tobias, 2018. "57 Channels (And Nothin On): Does TV-News on the Eurozone affect Government Bond Yield Spreads?," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181610, Verein für Socialpolitik / German Economic Association.
    20. Hayo, Bernd & Neuenkirch, Matthias, 2015. "Central bank communication in the financial crisis: Evidence from a survey of financial market participants," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 166-181.

    More about this item

    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; Modern Monetary Theory
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:awi:wpaper:0536. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gabi Rauscher (email available below). General contact details of provider: https://edirc.repec.org/data/awheide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.