Watch the indices! Derivatives and the Eurozone crisis
Subject
Economics
Publishing details
Authors / Editors
Portes R;Delatte A
Biographies
Publication Year
2014
Abstract
In retrospect, it is striking that the sovereign bond spreads of peripheral Eurozone countries surged while the economic conditions were gradually deteriorating. This column provides a new explanation for this phenomenon. It suggests that the markets in credit default swap indices have exacerbated shocks to economic fundamentals. The same change in fundamentals had a higher impact on the spread during the crisis period than it had previously.
Available on ECCH
No
