Sovereign Debt Crisis in Portugal and in Spain

REM Working Paper 112-2019

33 Pages Posted: 9 Jan 2020

See all articles by Antonio Afonso

Antonio Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa

Nuno Verdial

affiliation not provided to SSRN

Date Written: December 15, 2019

Abstract

The 2007-2008 financial crisis and the European sovereign debt crisis effects rippled through the financial system, banks and sovereign states. We analyze these events, focusing on the Portuguese and Spanish case after providing an insight into the Eurozone. We assessed the pricing of sovereign risk by performing an OLS/2SLS fixed effects panel analysis on a pool of Eurozone countries and a SUR regression with Portugal and Spain covering the period 1999:11 until 2019:6. Our results show that the pricing of sovereign risk changed with the crisis and the “whatever it takes” speech of Mario Draghi. Specifically, market pricing of the Eurozone credit risk, liquidity risk and the risk appetite increased after the crisis and it relaxed afterwards. We did not find evidence of specific pricing regime changes after the speech in the Portuguese and Spanish case.

Keywords: Sovereign debt, Yield spreads, Crises, Unconventional Monetary Policy, Portugal, Spain

JEL Classification: C23, E44, E52, G01

Suggested Citation

Afonso, Antonio and Verdial, Nuno, Sovereign Debt Crisis in Portugal and in Spain (December 15, 2019). REM Working Paper 112-2019. Available at SSRN: https://ssrn.com/abstract=3504337 or http://dx.doi.org/10.2139/ssrn.3504337

Antonio Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://https://www.iseg.ulisboa.pt/aquila/homepage/aafonso

UECE (Research Unit on Complexity and Economics)

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://https://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

Nuno Verdial

affiliation not provided to SSRN

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