Bulletin n. 1-2/2014
November 2014
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
    • Gibson Heather D., Hall Stephen G., Tavlas George S.
    Fundamentally Wrong: Market Pricing of Sovereigns and the Greek Financial Crisis
    in Journal of Macroeconomics , Volume 39, Part B, March 2014 ,  2014 ,  405-419
    We investigate the impact of the economic fundamentals, sovereign credit ratings, political uncertainty, and the ECB’s Securities Markets Program (SMP) on Greek sovereign spreads. Our findings show that sovereign downgrades and political uncertainty appear to have been drivers of the sharp rises in Greek sovereign spreads from 2008–2009 onwards, over-and-above the impact of the economic fundamentals. Our findings also show that prior to 2008–2009, the markets failed to incorporate Greece’s deteriorating fundamentals into the price of Greek sovereigns. We demonstrate that, once markets reassessed their pricing of Greek credit risk, the change in the influence of the fundamentals came swiftly and abruptly, exhibiting overshooting characteristics. The SMP reduced spreads while it was in operation.
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