All in: Market expectations of eurozone integrity in the sovereign debt crisis

Review of International Political Economy

Volumn 22, Issue 3, 2015, Pages 626-655

  Chang, Michele ^a   Leblond, Patrick ^b  

^a EU International Relations and Diplomacy Studies Department   (Belgium)

^b UNIVERSITY OF OTTAWA   (Canada)

Author keywords

European monetary union; eurozone; Financial crisis; investors; market behaviour; single currency; sovereign bonds

Indexed keywords

EID: 84933181784     PISSN: 09692290     EISSN: 14664526     Source Type: Journal    
DOI: 10.1080/09692290.2014.941905     Document Type: Article

References (82)

1. J.Aizenman,, M.Hutchison, and Y.Jinjarak, (2013). ‘What is the risk of European sovereign debt default? Fiscal space, CDS spreads and market pricing of risk’, Journal of International Money and Finance, 34 (April): 37–59.
2. V.Alexander, and P.Anker, (1997). ‘Fiscal Discipline and the Question of Convergence of National Interest Rates in the European Union’, Open Economies Review, 8(4): 335–352.
3. M.Andersson,, L.J.Hansen, and S.Sebestyén, (2006). Which News Moves the Euro Area Bond Market? Working Paper Series No. 631. Frankfurt: European Central Bank.
4. M.G.Arghyrou, and A.Kontonikas, (2011). ‘The EMU Sovereign-Debt Crisis: Fundamentals, Expectations and Contagion’, European Economy, Economic Papers No. 436. Brussels: European Commission, Directorate-General for Economic and Financial Affairs.
5. M.G.Arghyrou, and J.D.Tsoukalas, (2011). ‘The Greek Debt Crisis: Likely Causes, Mechanics and Outcomes’, World Economy, 34(2): 173–191.
6. A.Åslund, (2012). ‘Why a Breakup of the Euro Area Must Be Avoided: Lessons from Previous Breakups’, Policy Briefs PB12-20. Washington: Peterson Institute for International Economics.
7. S.Barrios,, P.Iversen,, M.Lewandowska, and R.Setzer, (2009). ‘Determinants of Intra-euro Area Government Bond Spreads During the Financial Crisis’, European Economy, Economic Papers No. 388. Brussels: European Commission, Directorate-General for Economic and Financial Affairs.
8. A.Belke, (2011). Doomsday for the Euro Area: Causes, Variants and Consequences of Breakup. Gutersloh: Bertelsmann Stiftung.
9. A.Belke, (2013). ‛Non-Standard Monetary Policy Measures – Magic Wand or Tiger by the Tail?, Paper prepared for the European Parliament Policy Department A: Economic and Scientific Policy.
10. J.Beirne, and M.Fratzscher, (2013). ‘The Pricing of Sovereign Risk and Contagion During the European Sovereign Debt Crisis’, Journal of International Money and Finance, 34 (April): 60–82.
11. W.Bernhard, and D.Leblang, (2006). Democratic Processes and Financial Markets: Pricing Politics. Cambridge: Cambridge University Press.
12. K.Bernoth, and B.Erdogan, (2012). ‘Sovereign Bond Yield Spreads: A Time-Varying Coefficient Approach’, Journal of International Money and Finance, 31(3): 639–656.
13. K.Bernoth,, J.von Hagen, and L.Schuknecht, (2012). ‘Sovereign Risk Premiums in the European Government Bond Market’, Journal of International Money and Finance, 31(5): 975–995.
14. M.D.Bordo, and A.J.Schwartz, (1996). ‘Why Clashes Between Internal and External Stability Goals End in Currency Crises’, Open Economies Review, 7(Supplement 1): 437–468.
15. L.A.Bovenberg,, J.J.M.Kremers, and P.R.Masson, (1991). ‘Economic and Monetary Union in Europe and Constraints on National Budgetary Policies’, IMF Staff Papers, 38(2): 374–398.
16. W.Buiter, (2011). ‘The Terrible Consequences of a Eurozone Collapse’, Financial Times, 8 December.
17. W.Buiter, and E.Rahbari, (2012). ‘The European Central Bank as Lender of Last Resort for Sovereigns in the Eurozone’, Journal of Common Market Studies, 50(Supplement s2): 6–35.
18. G.Calvo, (1998). ‘Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops’, Journal of Applied Economics, 1(1): 35–54.
19. J.Carmassi, and S.Micossi, (2010). How Politicians Excited Financial Markets’ Attack on the Eurozone. VoxEU.org, 24 June. [http://www.voxeu.org/article/spooking-markets-politicians-confusion-and-eurozone-crisis (last access: 9 April 2013)
20. M.Chang, (2004). Realigning Interests: Crisis and Credibility in European Monetary Integration. New York: Palgrave Macmillan.
21. H.L.Cole, and T.J.Kehoe, (1996). ‘A Self-Fulfilling Model of Mexico's 1994-1995 Debt Crisis’, Journal of International Economics, 41(3-4): 309–330.
22. P.De Grauwe, and Y.Ji, (2012). ‘Mispricing of Sovereign Risk and Macroeconomic Stability in the Eurozone’, Journal of Common Market Studies, 50(6): 866–880.
23. P.De Grauwe, and Y.Ji, (2013). ‘Self-fulfilling Crises in the Eurozone: An Empirical Test’, Journal of International Money and Finance, 34 (April): 15–36.
24. Deutsche Bank Research. (2001). ‘EMU Government Bonds: Yield Spreads and What Causes Them’, Frankfurt Voice, July 30, 2–5. [http://www.dbresearch.com/PROD/DBR_INTERNET_DE-PROD/PROD0000000000034731/EMU+government+bonds%3A+yield+spreads+and+what+causes+them.pdf (last access: 26 June 2013)
25. A.Di Cesare,, G.Grande,, M.Manna, and M.Taboga, (2012). ‘Recent Estimates of Sovereign Risk Premia for Euro-Area Countries’, Questioni di Economia e Finanza, Occasional Papers No. 128. Rome: Banca d’Italia.
26. R.Dornbusch, (1997). ‘Fiscal Aspects of Monetary Integration’, American Economic Review, 87(2): 221–223.
27. B.Eichengreen, (1993).‘European Monetary Unification’, Journal of Economic Literature, 31(3): 1321–1357.
28. B.Eichengreen, (2007). ‘The Breakup of the Euro Area’ NBER Working Paper No. 13393. Cambridge, MA: National Bureau of Economic Research.
29. B.Eichengreen, and A.Mody, (1998). ‘What Explains Changing Spreads on Emerging-market Debt? Fundamentals or Market Sentiment?, NBER Working Paper No. 6408. Cambridge, MA: National Bureau of Economic Research.
30. B.Eichengreen, and C.Wyplosz, (1998). ‘The Stability Pact: more than a minor nuisance?, Economic Policy, 13(26): 65–113.
31. ECB. (2003). Monthly Bulletin, November. Frankfurt: European Central Bank.
32. ECB. (2014). 'Long-term interest rate statistics for EU member states', Frankfurt: European Central Bank, http://www.ecb.europa.eu/stats/money/long/html/index.en.html (accessed 12 June 2014).
33. European Commission (2008). ‘EMU@10: Successes and Challenges after 10 years of Economic and Monetary Union’, European Economy No. 2. Brussels: Directorate-General, Economic and Financial Affairs.
34. European Commission. (2010). Report on Greek Government Deficit and Debt Statistics. 8 January
35. European Commission. (2011). ‘Economic Adjustment Programme for Ireland—Summer 2011 Review’ European Economy, Occasional Papers No. 84, September. Brussels: Directorate-General, Economic and Financial Affairs.
36. European Council. (2012). ‘Euro Area Summit Statement’, 29 June, Brussels, http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/131359.pdf (accessed 24 July 2014).
37. K.Featherstone, (2011). ‘The Greek Sovereign Debt Crisis and EMU: A Failing State in a Skewed Regime’, Journal of Common Market Studies, 49(2): 193–217.
38. J.A.Frankel, and A.K.Rose, (1998). ‘The Endogeneity of the Optimum Currency Area Criteria’, The Economic Journal, 108(449): 1009–1025.
39. T.Gade,, M.Salines,, G.Glöckler,, S.Strodthoff, (2013). ‘Loose Lips Sinking Markets?”: The Impact of Political Communication on Sovereign Bond Spreads’, Occasional Paper Series No. 150. Frankfurt: European Central Bank.
40. A.R.Ghosh,, J.D.Ostry, and M.S.Qureshi, (2013). ‘Fiscal Space and Sovereign Risk Pricing in a Currency Union’, Journal of International Money and Finance, 34 (April): 131–163.
41. F.Giavazzi, and M.Pagano, (1988). ‘The Advantages of Tying One's Hands: EMS Discipline and Central Bank Credibility’, European Economic Review, 32(5): 1055–1075.
42. F.Giavazzi, and M.Pagano, (1990). ‘Confidence Crises and Public Debt Management’, in M.Draghi and R.Dornbusch (eds). Capital Markets and Debt Management. Cambridge: Cambridge University Press
43. H.D.Gibson,, S.G.Hall, and G.S.Tavlas, (2012). ‘The Greek Financial Crisis: Growing Imbalances and Sovereign Spreads’, Journal of International Money and Finance, 31(3): 498–516.
44. R.Giordano,, M.Pericoli,, P.Tommasino, (2013). ‘Pure or Wake-up-call Contagion? Another Look at the EMU Sovereign Debt Crisis’, Temi di Discussione (Working Paper) No. 904. Rome: Banca d’Italia.
45. R.Glick, and M.Hutchison, (1993). ‘Fiscal Policy in Monetary Unions: Implications for Europe’, Open Economies Review, 4(1), 39–65.
46. M.Goldstein,, G.L.Kaminsky, and C.M.Reinhart, (2000). Assessing Financial Vulnerability: An Early Warning System for Emerging Markets. Washington: Institute for International Economics.
47. D.Gros, (2011). ‘External versus Domestic Debt in the Euro Crisis’, CEPS Policy Brief No. 243, 25 May. Brussels: Centre for European Policy Studies.
48. D.Gros, and A.Giovannini, (2011). ‘The EFSF as a European Monetary Fund: Does it Have Enough Resources?, CEPS Commentary, 22 July. Brussels: Centre for European Policy Studies.
49. M.Heipertz, and A.Verdun, (2010). Ruling Europe: The Politics of the Stability and Growth Pact. New York: Cambridge University Press.
50. IMF. (2012). ‘Statement by the EC, ECB, and IMF on the Third Review Mission to Portugal’, Press Release No. 12/59, 28 February. Washington: International Monetary Fund, http://www.imf.org/external/np/sec/pr/2012/pr1259.htm (last access: 15 July 2013).
51. IMF. (2014). ‘International Financial Statistics’, Washington: International Monetary Fund (accessed 15 January 2014).
52. S.Jahjah, (2001). ‘Financial Stability and Fiscal Crises in a Monetary Union’, Working Paper No. WP/01/201. Washington: International Monetary Fund.
53. J.F.Kirkegaard, (2010a). ‘Europe's Huge €120 Billion Gamble’, Realtime Economic Issues Watch, 2 May. Washington: Peterson Institute for International Economics, http://www.piie.com/blogs/realtime/?p=1533 (last access: 10 July 2013).
54. J.F.Kirkegaard, (2010b). ‘The European Central Bank Calms the Storm—for Now’, Realtime Economic Issues Watch, 4 May. Washington: Peterson Institute for International Economics, http://www.piie.com/realtime/?p=1538 (last access: 24 August 2010).
55. J.F.Kirkegaard, (2010c). ‘Why It Is Still Possible to Be Bullish on Europe’, Realtime Economic Issues Watch, 2 December. Washington: Peterson Institute for International Economics, http://www.piie.com/blogs/realtime/?p=1891 (last access: 15 July 2013).
56. P.Krugman, (1979). ‘A Model of Balance-of-Payments Crises’, Journal of Money, Credit, and Banking, 11(3): 311–325.
57. D.Leblang, and S.Satyanath, (2006). ‘Institutions, Expectations, and Currency Crises’, International Organization, 60(1): 245–262.
58. P.Leblond, (2004). ‘Completing the Maastricht Contract: Institutional Handicraft and the Transition to European Monetary Union’, Journal of Common Market Studies, 42(3): 553–572.
59. P.Leblond, (2006). ‘The Political Stability and Growth Pact Is Dead: Long Live the Economic Stability and Growth Pact’, Journal of Common Market Studies, 44(5): 969–990.
60. P.Leblond, (2014). ‘The logic of a banking union for Europe’, Journal of Banking Regulation, advance online publication 4 June, doi:10.1057/jbr.2014.11.
61. P.Leblond, and B.Paudyn, (2011). ‘One for All and All for One? The Eurozone's Bailout Arrangements’, EU Political Economy Bulletin, 15(Winter): 5–10.
62. D.Maltritz, (2012). ‘Determinants of Sovereign Yield Spreads in the Eurozone: A Bayesian Approach’, Journal of International Money and Finance, 31(3): 657–672.
63. S.Manganelli, and G.Wolswijk, (2009). ‘What Drives Spreads in the Euro Area Bond Market?, Economic Policy, 24(58): 191–240.
64. F.P.Mongelli, (1999).,The Effects of the European Economic and Monetary Union (EMU) on National Fiscal Sustainability’, Open Economies Review, 10(1): 31–61.
65. Moody's. (2011). Expanded Assistance to Greece Relieves Some Pressure, but Significant Risks Remain. Investor Service, Issuer Comment, October 31.
66. Moody's (2012a). Market-based Risk Measures Improve on Rewritten Greek Rescue Terms. Moody's Capital Markets Research, 3 December.
67. Moody's. (2012b). Market-Derived Sovereign Risk Signals Suggest Contagion Limited to Portugal. Moody's Capital Markets Research, 23 January.
68. A.Moravcsik, (1998). The Choice for Europe: Social Purpose & State Power from Messina to Maastricht. Ithaca: Cornell University Press.
69. L.Mosley, (2004). ‘Government-Financial Market Relations after EMU’, European Union Politics, 5(2): 181–209.
70. W.E.Oates, (2005). ‘Toward a Second-Generation Theory of Fiscal Federalism’, International Tax and Public Finance, 12(4): 349–373.
71. M.Obstfeld, (1986). ‘Rational and Self-Fulfilling Balance-of-Payments Crises’, American Economic Review, 76(1): 72–81.
72. M.Obstfeld, (1996). ‘Models of Currency Crises With Self-Fulfilling Features’, European Economic Review, 40(3–5): 1037–1047.
73. M.Pagano, and E.-L.von Thadden, (2004). ‘The European Bond Markets under EMU’, Oxford Review of Economic Policy, 20(4): 531–554.
74. L.Quaglia, and S.Royo, (2014). ‘Banks and the Political Economy of the Sovereign Debt Crisis in Italy and Spain’ Review of International Political Economy, advance online publication, 28 January, doi:10.1080/09692290.2013.877059.
75. C.M.Reinhart, and K.S.Rogoff, (2013). ‘Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten’, IMF Working Paper No. WP/13/266. Washington: International Monetary Fund.
76. W.Sandholtz, (1993). ‘Choosing Union: Monetary Politics and Maastricht’, International Organization, 42(1): 1–39.
77. Steen, M. (2013). ‘ECB action calmed market, Draghi says’, FT.Com, retrieved from http://search.proquest.com/docview/1365643302?accountid=14701 (accessed 24 July 2014).
78. J.von Hagen,, L.Schuknecht, and G.Wolswijk, 2011. ‘Government Bond risk Premiums in the EU Revisited: The Impact of the Financial Crisis’, European Journal of Political Economy, 27(1): 36–43.
79. Van Rompuy, H. (2012). ‘Towards a genuine economic and monetary union’, Report by the President of the European Council, EUCO 120/12, Brussels: European Council, http://ec.europa.eu/economy_finance/crisis/documents/131201_en.pdf (accessed 24 July 2014).
80. S.Walter, and T.D.Willett, (2012). ‘Delaying the Inevitable: A Political Economy Approach to Currency Defenses and Depreciation’, Review of International Political Economy, 19(1): 114–139.
81. Watkins, M. (2012). ‘ECB loan facility is no silver bullet’. FT.Com, retrieved from http://search.proquest.com/docview/916161530?accountid=14701, 24 July 2014.
82. World Economic Forum. (2008). Global Competitiveness Report 2008-2009, Geneva, http://www.weforum.org6 pdf6 GCR086 GCR08.pdf (accessed 15 January 2014).