We use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard & Poor's, Moody's, Fitch). Our results show: significant responses of government bond yield...

This paper develops a general equilibrium model to analyze the link between financial imbalances and financial crises. The model features an interbank market subject to frictions and where two equilibria may (co-)exist. The normal times equilibrium is characterized by a deep market with highly...

This paper provides an empirical assessment of interdependence and contagion across three asset classes (bonds, stocks, and currencies) for over 60 economies over the period 1998 to 2011. Using a global VAR, we test for changes in the transmission mechanism – both within and cross-market...

In light of rapidly increasing foreign equity liability positions of emerging market economies, we test for a necessary condition of international risk sharing, namely for systematic patterns between idiosyncratic output fluctuations and financial market developments. Panel analysis of 22...

We identify the effect of financial integration on international business cycle synchronization, by utilizing a confidential database on banks' bilateral exposure and employing a country-pair panel instrumental variables approach. Countries that become more integrated over time have less...

The role that the price of oil plays in economic analysis in central banks as well as in financial markets has evolved over time. Oil is not seen anymore just as a input to production but also as a barometer of global economic activity as well as a financial asset. A high frequency structural...

In the policy debate on the effectiveness of the Global Financial Safety Net, concerns have been raised that expectations of adverse effects of IMF programmes may deter countries from asking for an IMF programme when they need one, a form of ̒IMF stigma̓. We explore the existence of IMF...

Financial asset prices contain a rich set of real-time information on the economy. To extract this information, it is crucial to understand the driving factors behind financial market developments. In this paper, we exploit daily cross-asset price movements in a sign-restricted BVAR model to...

This paper shows how the combined endogenous reaction of banks and investment funds to an exogenous shock can amplify or dampen losses to the financial system compared to results from single-sector stress testing models. We build a new model of contagion propagation using a very large and...

We assess the sustainability of public finances in the EU15 over the period 1970-2006 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel...