Mispricing of Sovereign Risk and Macroeconomic Stability in the Eurozone
212 citations recorded by the source corpus.
This article presents evidence that a significant part of the surge in the spreads of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) countries in the eurozone during 2010–11 was disconnected from underlying increases in the debt‐to‐GDP (gross domestic product) ratios, and was the result of negative market sentiments that became very strong since the end of 2010. It is argued that the systematic mispricing of sovereign risk in the eurozone intensifies macroeconomic instability, leading to bubbles in good years and excessive austerity in bad years.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/a3b94d9a9342a0d4beb394a8d440faa221cf6fbb
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Citations in the corpus
- A historical institutionalist explanation of the EU's responses to the euro area financial crisis (2015, background): “Economists from the United States (US) and elsewhere uttered serious criticisms of the design of Europe’s Economic and Monetary Union (EMU) and the EU as a whole (De Grauwe 2011, 2012; De Grauwe and Ji 2012; Eichengreen 2012a, 2012b; Feldstein 2012; Krugman 2011; 2012; Sargent 2011).”
- Saving the Euro at the Cost of Democracy (2013, background): “When, in the wake of the banking crisis and the general economic downturn, the financial position of countries like Ireland and Greece deteriorated, confidence in their ability to repay their debts sharply declined and the interest rates on their bonds increased (De Grauwe and Ji, 2012).”