Do words matter? The impact of communication on the PIIGS' CDS and bond yield spreads during Europe's sovereign debt crisis

Büchel, Konstantin

doi:10.1016/j.ejpoleco.2013.08.004

Cited by 24 publications

(30 citation statements)

References 14 publications

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“…At the European level, we find strong and statistically significant effects for EU decisions and ECB statements, 13 but not for EU statements and ECB decisions. This is consistent with the expectation that EU statements are largely ignored by the market, whereas 12 For similar results, showing no positive effect of national efforts to reassure markets, see Büchel (2013); McMenamin et al (2015). 13 These results stand in notable contrast to those of Smeets and Zimmermann (2013).…”

Section: Resultssupporting

confidence: 70%

Capacity, Willingness, and Sovereign Default Risk: Reassuring the Market in Times of Crisis

Bølstad

Elhardt

2017

J of Common Market Studies

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Preserving the trust of bond markets is crucial for the world's many indebted countries, but it is still unclear when and how national or international actors can contribute to this goal. We present a set of arguments addressing this question and test them on the case of the eurozone debt crisis. Distinguishing between actors' capacity and willingness to avoid defaults, we argue that the crisis was marked by a lack of capacity at the national level, and limited or uncertain willingness at the European level. Accordingly, we find that European‐level efforts to reassure markets had considerably stronger effects than similar efforts at the national level. Furthermore, national efforts appear to have mattered the least in countries with the least capacity. These findings are based on a comprehensive new dataset of political events and relevant news, and they hold across a number of robustness checks and placebo tests.

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Section: Resultssupporting

confidence: 70%

Capacity, Willingness, and Sovereign Default Risk: Reassuring the Market in Times of Crisis

Bølstad

Elhardt

2017

J of Common Market Studies

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“…In addition to those cited aboveBüchel (2013) finds that statements made by representatives of Germany, France, the EU and ECB had an impact, but not those made by representatives of the smaller Eurozone member countries. He reports evidence of an asymmetrical response to 'dovish' and 'hawkish' comments, with good news having a less significant and smaller effect Mohl and Sondermann (2013).…”

mentioning

confidence: 73%

“…Although used much less frequently in the EMH literature, several studies have sought to investigate the extent to which relatively large changes in the price of particular financial assets or instruments have been associated with the publication of new information by the press, news agencies or relevant financial institutions (see, for example, Cutler et al 1989;Caporale et al 2014;Beetsma et al 2013;Büchel 2013;Mohl and Sondermann 2013;Afonso et al 2012;Mink and De Haan 2013). In some cases the focus has been on stock market prices in general and in others on the stock market value of selected banks.…”

Section: The Impact Of Newsmentioning

confidence: 98%

Behavioral Finance and Efficient Markets: What does the Euro Crisis Tell us?

Bird

Willett

2017

Open Econ Rev

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The crisis in the Eurozone between 2009 and 2015 provides an opportunity to test whether financial markets fully display the characteristics associated with the efficient market hypothesis or whether behavioral approaches which focus on excessive pessimism and confirmation bias also offer insights into the performance of markets. In this paper we test several important aspects of market behavior. Specifically we examine the extent to which large changes in risk premia amongst the countries that encountered crises were related to news. We also investigate whether the impact of good and bad news was symmetrical. Finally we explore whether changes in risk premia in Greece affected risk premia in other countries in an asymmetrical and biased way. We discover that while there is considerable evidence that financial markets often performed in an efficient way during the crisis, there are also important departures from this pattern that are consistent with the behavioral approach. Our findings imply that both the efficient and behavioral approaches are helpful when trying to understand how markets perform.

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“…Gade et al (2013) investigate the extent to which political communication, defined as "policy-makers' pronouncements on fiscal policy and public finance", had an impact on the sovereign bond spreads in euro area countries, showing that this effect is evident in Greece, Ireland and Portugal. Büchel (2013) analyses the effects of public statements by ECB Governing…”

Section: Ecb Working Paper 1782 April 2015mentioning

confidence: 99%

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

Falagiarda

Gregori

2015

European Journal of Political Economy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Terms of use: Documents in EconStor may Working Paper SeriesThe impact of fiscal policy announcements by the Italian government on the sovereign spread: a comparative analysis JEL codes: E43, E62, G01, G12

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Do words matter? The impact of communication on the PIIGS' CDS and bond yield spreads during Europe's sovereign debt crisis

Cited by 24 publications

References 14 publications

Capacity, Willingness, and Sovereign Default Risk: Reassuring the Market in Times of Crisis

Capacity, Willingness, and Sovereign Default Risk: Reassuring the Market in Times of Crisis

Behavioral Finance and Efficient Markets: What does the Euro Crisis Tell us?

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

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