Sovereign Credit and Geopolitical Risks During and After the EMU Crisis

43 Pages Posted: 10 Apr 2022

See all articles by Theodore D. Bratis

Theodore D. Bratis

Athens University of Economics and Business

Georgios P. Kouretas

Athens University of Economics and Business; IPAG Business School

nikiforos laopodis

American College of Greece (DEREE)

Prodromos Vlamis

University of Piraeus

Date Written: December 30, 2021

Abstract

This paper focuses on the sovereign crisis of the Euro debt crisis era, and we address the existence of the relationship of CDS and bond markets sovereign credit risk pricing for selected core and periphery EMU countries, during and after the 2009 EMU crisis. We study this relationship in conjunction to geopolitical risk as a measure of macroeconomic uncertainty. We use daily observations for several bond maturities and CDS premium with reference to the core (France and Germany) vs. periphery EMU countries (Portugal, Italy, Ireland Spain, and Greece) for the period 2009 to 2014. To measure global geopolitical risk, we employ the Caldara and Iacoviello (2018) global geopolitics index (GPR). Using alternative econometric approaches, we find adequate evidence of volatility spillovers between the geopolitical risk index and sovereign risk markets mainly during the crisis period (2009-2012) and weaker during the easing of the eurozone debt crisis period (2012-2014). Moreover, based on Granger causality the estimation of the short- term dynamics reveals a significant linkage during the post-crisis period rather than during crisis.

Keywords: sovereign pricing, sovereign crisis, geopolitical risk

JEL Classification: C32, E60, G01, G15

Suggested Citation

Bratis, Theodore D. and Kouretas, Georgios P. and laopodis, nikiforos and Vlamis, Prodromos, Sovereign Credit and Geopolitical Risks During and After the EMU Crisis (December 30, 2021). Available at SSRN: https://ssrn.com/abstract=4051483 or http://dx.doi.org/10.2139/ssrn.4051483

Theodore D. Bratis (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

Georgios P. Kouretas

Athens University of Economics and Business ( email )

Department of Business Administration
Athens, GR-10434
Greece

HOME PAGE: http://www.aueb.gr/Users/kouretas/index_en.html

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

Nikiforos Laopodis

American College of Greece (DEREE) ( email )

Gravias 6,
Aghia Paraskevi
Athens, attica 153-42
Greece
+30 210 6009800 (Phone)

HOME PAGE: http://www.alba.edu.gr/faculty/Pages/Profiles/Laopodis.Nikiforos_T%20_677.profile.aspx?WebID=0faf2b8

Prodromos Vlamis

University of Piraeus ( email )

Greece

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
38
Abstract Views
201
PlumX Metrics