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The impact of fiscal policy announcements by the Italian government on the sovereign spread: a comparative analysis

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  • Falagiarda, Matteo
  • Gregori, Wildmer Daniel

Abstract

This paper attempts to evaluate the impact of fiscal policy announcements by the Italian government on the long-term sovereign bond spread of Italy relative to Germany. After collecting data on relevant fiscal policy announcements, we perform an econometric comparative analysis between the three administrations that followed one another during the period 2009-2013. The results indicate that only fiscal policy announcements made by members of Monti's cabinet had a significant impact on the Italian spread. We argue that these findings may be partly explained by a credibility gap between Monti's technocratic administration and Berlusconi's and Letta's governments. JEL Classification: E43, E62, G01, G12

Suggested Citation

  • Falagiarda, Matteo & Gregori, Wildmer Daniel, 2015. "The impact of fiscal policy announcements by the Italian government on the sovereign spread: a comparative analysis," Working Paper Series 1782, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20151782
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:intfin:v:53:y:2018:i:c:p:50-75 is not listed on IDEAS
    2. 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.
    3. Gibran Watfe, 2015. "The Impact of the ECB's Asset Purchase Programmes on Sovereign Bond Spreads in the Euro Area," Bruges European Economic Research Papers 35, European Economic Studies Department, College of Europe.
    4. Jasper de Jong, 2018. "The effect of fiscal announcements on interest spreads: Evidence from the Netherlands," DNB Working Papers 584, Netherlands Central Bank, Research Department.

    More about this item

    Keywords

    fiscal policy announcements; GARCH models; interest rate spread; political communication; sovereign debt crisis;

    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
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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