The Greek financial crisis: growing imbalances and sovereign spreads

By Heather D. Gibson, Stephen G. Hall, George S. Tavlas. Social Science Research Network, 2012

194 citations recorded by the source corpus.

We discuss the origins of the Greek financial crisis as manifested in the growing fiscal and current-account deficits since euro-area entry in 2001. We then extend a model typically used to explain risk premia to assess the extent to which credit ratings captured these premia. Next, we estimate a cointegrating relationship between spreads and their long-term fundamental determinants and compare the spreads predicted by this estimated relationship with actual spreads. We find that spreads were significantly below what would be predicted by fundamentals from end-2004 up to the middle of 2005; by contrast, since May 2010, actual spreads have exceeded predicted spreads by some 400 basis points.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/6a44cf29e9674f96d1762d1a4c2352e22ac81109

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Yuemei Ji
2. Marcel Fratzscher
3. P. Grauwe
4. C. Işık
5. E. Kasimati
6. J. Beirne
7. Philip R. Lane
8. Serdar Ongan

In Finance

1. Yuemei Ji
2. Marcel Fratzscher
3. P. Grauwe
4. C. Işık
5. J. Beirne
6. Philip R. Lane
7. Serdar Ongan
8. Ornella Ricci

Citations in the corpus

• Analyzing the causalities between economic growth, financial development, international trade, tourism expenditure and/on the CO2 emissions in Greece (2017, background): “First, Greece provides an interesting case study because the country has dealt with severe financial crises like the other European countries in Eurozone (Gibson et al., 2012; Katsimi and Moutos, 2010).”
• The European Sovereign Debt Crisis (2012, background): “Financial Imbalances and External Imbalances A key predictor of a banking crisis is the scale of the preceding domestic credit boom (Gourinchas and Obstfeld 2012).”
• Mispricing of Sovereign Risk and Macroeconomic Stability in the Eurozone (2012, background): “…(Attinasi et al., 2009; Arghyrou and Kontonikas, 2010; Gerlach et al., 2010; Schuknecht et al., 2011; Caceres et al., 2010; Caporale and Girardi, 2011; Gibson et al., 2011).1 One of the novel features of this article is to compare the eurozone countries with ‘stand-alone’ countries – that is,…”
• The Pricing of Sovereign Risk and Contagion During the European Sovereign Debt Crisis (2013, result): “8 The findings in relation to Greece are consistent with those of Gibson et al (2012), who make the point that before the crisis, interest rate spreads were much lower than justified by fundamentals owing to the role played by Greece’s euro area membership on biasing investor expectations.”