The information of news & announcements on Greek and European policy and/or the Greek and European economy, about Greek Debt sustainability, Greek exit from the Euro Area and the possible contagion to the rest of the EMU countries, as revealed by market responses in the CDS markets and the country government bond markets
SubjectΟικονομική κρίση ; Ευρωπαϊκή Ένωση -- Πολιτική και διακυβέρνηση ; Νομισματική πολιτική ; Νομισματική πολιτική -- Ευρωπαϊκή Ένωση, Χώρες της
This paper intents to provide insight and statistical evidence, on how and at what extent, facts and developments unfavorable to the Greek debt sustainability and solvency, may have influenced in the export of the Greek debt crisis to the country’s EMU peers. The paper describes how relevant information has been tracked, chronologically organized and classified as adverse or not. A multiple, short term horizon event study, based on the estimation of LS regression models, specified for each country and controlled for market driven volatility and risk, is used to assess various EMU members CDS premia and BYS sensitivity to such events, throughout different sub-periods of a 3 year period, starting on September 2009. These adverse events are modeled via a time series Dummy variable, whose statistical significance and contribution (regression coefficient) is analyzed. The results suggest that 5 Year CDS premia and 10 Year Bond BYS variability is attributed to Greek debt related shocks, in a consistent, material way throughout major and diverse time periods. The CDS market incorporates shocks in advance of the Bond market and core EMU members are more sensitive to Greek shocks than the EMU periphery after the middle of the period under review.