Market Reactions to Quest for Decentralization and Independence: Evidence from Catalonia

28 Pages Posted: 8 May 2020

See all articles by Vincenzo Galasso

Vincenzo Galasso

University of Lugano; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2020


Regions seek more autonomy to reduce transfers to central governments and have more control on regional spending. Yet, decentralization increases regulatory uncertainty on joint responsibilities and quests for independence create political uncertainty. We evaluate costs and benefits from the Catalan-Spanish dispute using an event approach methodology that estimates stock market reactions to new events. We find negative stock market reactions to decentralization and independence. The approval of a Catalan Statute reduces returns for Catalan firms, which later benefitted from the partial reversal imposed by the Spanish Constitutional Court ruling. The strong political uncertainty emerging at the day of a (unconstitutional) referendum on independence strongly reduced returns of Catalan firms and of Spanish firms in the tradable sector. The Spanish Senate rejection of the declaration of Catalan independence reduced short-term political uncertainty and positively affected stock market returns of Catalan, but also Spanish, firms, largely compensating previous losses.

Keywords: Decentralization, event approach, Independence

JEL Classification: G14, H77

Suggested Citation

Galasso, Vincenzo, Market Reactions to Quest for Decentralization and Independence: Evidence from Catalonia (April 2020). CEPR Discussion Paper No. DP14641, Available at SSRN:

Vincenzo Galasso (Contact Author)

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, TN 6900

Centre for Economic Policy Research (CEPR)

United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics