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Bořek Vašíček
- 16 June 2015
- WORKING PAPER SERIES - No. 1810Details
- Abstract
- We identify a set of
- JEL Code
- C14 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Semiparametric and Nonparametric Methods: General
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
F37 : International Economics→International Finance→International Finance Forecasting and Simulation: Models and Applications
F47 : International Economics→Macroeconomic Aspects of International Trade and Finance→Forecasting and Simulation: Models and Applications
G01 : Financial Economics→General→Financial Crises
- 15 August 2014
- WORKING PAPER SERIES - No. 1717Details
- Abstract
- This study investigates the dynamics of the sovereign CDS term premium for five European countries. The CDS term premium can be regarded as a forward-looking measure of idiosyncratic sovereign default risk as perceived by financial markets. Using a Markov-switching unobserved component model, we decompose the daily CDS term premium into two components of statistically different nature and link them in a vector autoregression to various daily observed financial market variables. We find that such decomposition is vital for understanding the short-term dynamics of this premium. The strongest impacts can be attributed to CDS market liquidity, local stock returns, and overall risk aversion. By contrast, the impact of shocks from the sovereign bond market is rather muted. Therefore, the CDS market microstructure effect and investor sentiment play the main roles in sovereign risk evaluation in real time. Moreover, we also find that the CDS term premium response to shocks is regime-dependent and can be ten times stronger during periods of high volatility.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G15 : Financial Economics→General Financial Markets→International Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G24 : Financial Economics→Financial Institutions and Services→Investment Banking, Venture Capital, Brokerage, Ratings and Ratings Agencies - Network
- Macroprudential Research Network
- 3 April 2014
- WORKING PAPER SERIES - No. 1666Details
- Abstract
- The global financial crisis rapidly spread across borders and financial markets, and also distressed EU bond markets. The crisis did not hit all markets in the same way. We measure the strength and direction of linkages between 16 EU sovereign bond markets using a factor-augmented version of the VAR model in Diebold and Yilmaz (2009). We then provide a novel test for contagion by applying the multivariate structural break test of Qu and Perron (2007) on this FAVAR detecting significant sudden changes in shock transmission. Results indicate substantial spillover, especially between EMU countries. Differences in bilateral linkages are due to a combination of fiscal trouble and a large banking sector, as Belgium, Italy and Spain are central to shock transmission during the financial crisis. Contagion has been a rather rare phenomenon limited to a few well defined moments of uncertainty on financial assistance packages for Greece, Ireland and Portugal. Most of the frequent surges in market co-movement are driven by larger shocks rather than by contagion.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
C14 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Semiparametric and Nonparametric Methods: General
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H62 : Public Economics→National Budget, Deficit, and Debt→Deficit, Surplus
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt - Network
- Macroprudential Research Network
- 22 October 2012
- WORKING PAPER SERIES - No. 1486Details
- Abstract
- We search for early warning indicators that could indicate important risks in developed economies. We therefore examine which indicators are most useful in explaining costly macroeconomic developments following the occurrence of economic crises in EU and OECD countries between 1970 and 2010. To define our dependent variable, we bring together a (continuous) measure of crisis incidence, which combines the output and employment loss and the fiscal deficit into an index of real costs, with a (discrete) database of crisis occurrence. In contrast to recent studies, we explicitly take into account model uncertainty in two steps. First, for each potential leading indicator, we select the relevant prediction horizon by using panel vector autoregression. Second, we identify the most useful leading indicators with Bayesian model averaging. Our results suggest that domestic housing prices, share prices, and credit growth, and some global variables, such as private credit, are risk factors worth monitoring in developed economies.
- JEL Code
- C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
F47 : International Economics→Macroeconomic Aspects of International Trade and Finance→Forecasting and Simulation: Models and Applications
G01 : Financial Economics→General→Financial Crises - Network
- Macroprudential Research Network
- 19 October 2012
- WORKING PAPER SERIES - No. 1485Details
- Abstract
- We construct and explore a new quarterly dataset covering crisis episodes in 40 developed countries over 1970
- JEL Code
- C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
F47 : International Economics→Macroeconomic Aspects of International Trade and Finance→Forecasting and Simulation: Models and Applications
G01 : Financial Economics→General→Financial Crises - Network
- Macroprudential Research Network
Annexes- 19 October 2012
- ANNEX