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Regime-dependent sovereign risk pricing during the euro crisis. No 9, May 2016
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Regime-dependent sovereign risk pricing during the euro crisis. No 9, May 2016

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Previous work has documented a greater sensitivity of long-term government bond yields to fundamentals in Euro area stress countries during the euro crisis, but we know little about the driver(s) of regime- switches. Our estimates based on a panel smooth threshold regression model quantify and explain them: 1) investors have penalized a dete- rioration of fundamentals more strongly from 2010 to 2012; 2) a key indicator of regime switch is the premium of the financial credit default swap index: the higher the bank credit risk, the higher the extra pre- mium on fundamentals; 3) after ECB President Draghi’s speech in July 2012, it took one year to restore the non-crisis regime and suppress the extra premium.
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ISSN 2467-0677
ISBN 978-92-95081-36-9
DOI 10.2849/801247
Katalognummer DT-AD-16-009-EN-N
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ISSN 2467-0677 ISBN 978-92-95081-36-9 DOI 10.2849/801247 Katalognummer DT-AD-16-009-EN-N
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