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This paper looks into the contagion dynamics of sovereign credit rating changes with regards to bond yields in the period before and during the sovereign debt crisis in Europe. Our sample included European Union member countries, as well as a Eurozone subsample and a subsample excluding highly indebted countries. Events and outlooks from all three major rating agencies were considered. Our findings for the pre-crisis period are consistent with existing research, indicating an increase in borrowing costs by approximately five basis points in the case of a one-notch negative event, and insignificant effects in the case of positive events. During the crisis period, we observed a reversal of this effect, associating negative ratings with lower spreads on the entire sample. However, the effect was no longer significant when highly indebted countries were excluded from the sample, indicating that this effect may be tied to overly negative expectations. Lastly, we investigated the persistence of results, with only full-sample crisis period data displaying persistent effects. JEL Classification F01, F34, F42 Keywords credit rating, sovereign debt, default, debt crisis, European debt, sustainability Author's e-mail martin1703@gmail.com Supervisor's e-mail schneider.ondrej@gmail.com

Diss.--Zürich. / Bibliography: p. 7-9.

No description available.

The research looks at the design of fiscal and monetary policy in EMU. The characteristics of the "economic constitution" established in the Maastricht treaty are analysed to test their robustness to different hypothesis about fiscal sustainability and fiscal and monetary policy interaction. Chapter two illustrates how the possibility of default of public debt in one large member country creates interdependence among fiscal positions of all member countries. Chapter three and four show that a similar kind of interdependence between national fiscal position could be determined by the effect that un-funded fiscal expansions have on the level of prices. The theoretical argument, borrowed from the so called Fiscal Theory of Price Determination, is developed both in a closed economy, to illustrate the basic mechanism and its interpretation, and in a two country monetary union model. Chapter five analyses, in a game theoretical framework, how the interdependence between policy instruments should be recognised in full, in order for any policy to be effective. In a situation in which a possible conflict of objectives or preferences between policy makers is present, any institutional arrangements which does not deal with it positively is intrinsically inefficient and can result in the policies cancelling each other out. The last chapter develops an example on how the conflict between policy institutions can be endogenous to an institutional structure chosen to reduce the influence of policy uncertainty on the economy. It is therefore a note of caution about the common belief that is possible with simple institutional solutions to overcome differences in preferences or objectives that are characteristic of the European environment. The analysis suggests that both greater fiscal policies cooperation and decentralisation of policy institutions from national to regional are developments necessary to achieve the policy goals of the Monetary Union.

Corporate finance theory suggests that bank’s private information about borrowers lets them hold up borrowers for higher interest rates and that hold up power should increase with borrower risk, and if so, banks with private information about borrowers should increase their rates in recessions more than warranted by borrower risk alone. Studies have been concluded in other markets for these propositions, particularly for the US market. This paper has replicated these studies for an emerging economy (Republic of South Africa) to see if the findings will hold across dissimilar markets. Hold up cost is not just a function of information monopoly, Rajan, 1992 posits that firms with a higher probability of failure should suffer more from informational hold-up cost. The risk of failure is more pronounced during recession than in expansion and hence relationship banks with information monopolies are able to extract more rents in recession than warranted by borrower default risk alone. Using literature that suggest that information rents can be mitigated by multiple banking relationships, I investigated further, whether this problem of hold up cost can be mitigated through a different channel by studying credit spreads of firms that have publicly sourced funds, and continued to seek private funds in the South African market.Using LOANSPREAD as the dependent variable in a regression model, I find that loan spreads are higher for bank-dependent firms, rise in recessions and rise by a greater amount in recessions for bankdependent firms. In the context of this study I define bank-dependent firms as those firms who have issued no public bond. The key finding is that, indeed multiple banking relationships can reduce informational monopolies, but issuing public bonds can be another channel that South African firms can use to avoid being taken advantage of by financiers with information monopoly over competing financiers.

Comments and Discussion : Kitaura Koji

Thesis (Ph. D.)--Yale University, 1991. / Includes bibliographical references (leaves 138-143).

A dívida pública apresentou uma profunda deterioração a partir do início do plano Real, destacando-se os dois choques cambiais: de 1999 e 2002. De acordo com a literatura sobre o tema as questões institucionais e a composição patrimonial desempenham um importante papel para explicar o comportamento da dívida. O presente trabalho pretende avaliar os fatores que levaram ao aumento da dívida pública no período recente, pós-plano Real. Para tal busca-se entender o arcabouço regulatório e macroeconômico em que se insere a dívida pública brasileira. Feito isto, busca-se compreender não só o montante da dívida, mas também a sua composição e os seus prazos de vencimento. Assim, pretende-se evidenciar como a composição, prazos de vencimentos e arcabouço regulatório afetam o desempenho fiscal. Alguns fatores mostram que a concentração da dívida atrelada a indexadores como a taxa de câmbio e a taxa SELIC tornam o comportamento da dívida muito volátil em momentos de crise e, por conseguinte, provocariam uma deterioração fiscal. A redução do risco sistêmico e a migração de títulos pós-fixados para prefixados levaria a uma redução do risco (volatilidade) da dívida. Por outro lado, a utilização de títulos prefixados pode significar custos maiores em momentos de estabilidade e prazos menores, devido aos riscos inerentes à economia brasileira. Os resultados obtidos evidenciam um grande aumento da volatilidade da dívida em 1999 e em 2002, períodos que foram marcados pela elevada participação de títulos atrelados ao câmbio e à taxa SELIC. A partir do governo Lula evidencia-se um melhor resultado das contas públicas em virtude da evolução do arcabouço institucional, iniciado no Plano Real, e a redução da volatilidade da dívida. Destaca-se também a volta de uma participação significativa dos títulos prefixados, o que não se observava desde os anos iniciais do plano-Real. / The public debt has presented a profound deterioration since the implementation of the Real plan, emphasizing the two shocks that affected the Brazilian exchange rate in 1999 and in 2002. In accordance with the literature concerning this theme institutional issues and the public debt index composition have an important role in order to explain public debt`s evolution. This paper intends to evaluate the factors that caused the recent public debt`s increase after the Real plan. In order to achieve it, this dissertation tries to explore the regulatory and the macroeconomic environment embodied in Brazil. After that, it tries to comprehend not only public debt`s amount, but also its composition and debt term. So, this dissertation intends to provide evidence how public debt`s composition, debt term and regulatory issues affect the fiscal result. Some factors provide evidence that debt indexed by the exchange rate and the interest rate SELIC cause a volatile behavior during crisis resulting in a fiscal deterioration. The systemic risk reduction and the migration from not fixed indexed bonds to fixed indexed bonds would reduce debt`s risk (volatility). However, the utilization of fixed indexed bonds can represent higher costs and larger debt term during stability moments due to the risks associated to the Brazilian economy. The results obtained provide evidence on the great increase in the debt`s volatility in 1999 and in 2002, periods that were distinguished by strong participation of bonds indexed to the exchange rate and SELIC rate. Since president Lula government it`s perceived a better fiscal result due to the evolution of the institutional environment, after the Real plan implementation, and also public debt`s volatile reduction. We emphasize also the return of a significant participation of fixed bonds, a fact that wasn`t observed since initial years of the Real plan implementation.

Thesis (M.Com (Economics)) --University of Limpopo, 2018 / The burden of public debt is an economic issue, dominating debates in different sectors of our society. The post financial crisis era has been marked with an increasing level of public debt at international, national and sub-national level. The study investigates if public debt can affect economic growth in South Africa, for the period 1995 to 2016. The results for Johansen test of cointegration signposted the existence of cointegration among variables observed in this study. The trace statistic and max-eigen value complimented each other to confirm the cointegration, thus, showing a long run relationship. Furthermore, the Vector Error Correction Model (VECM) is applied to achieve the objectives of the study, complemented by other econometric tests such as, Granger causality, impulse response function and variance decomposition. The VECM results revealed the existence of a short run relationship between public debt and economic growth. Granger causality results have shown that public debt can Granger cause economic growth, and there is bi-direction relationship between the two variables. The results for Variance Decomposition indicate that, a shock to public debt causes 1.509115 % fluctuation in economic growth in the second quarter. In the fourth quarter, a shock to public debt account for 16.39628 % fluctuations in economic growth. This shows that, as time goes on, a shock to public debt account for a high percent of fluctuation in economic growth. The Impulse Response Function has shown that, the period of ten quarters marks a negative response of economic growth to public debt. Thus, one standard deviation shock in public debt will inversely affect economic growth. The diagnostic tests such as serial correlation and heteroskedasticity bode well for the model because, neither serial correlation nor heteroskedasticity has been found. Moreover, the model has shown that the residuals are normally distributed, and also the stability of the model has been confirmed. The study recommends that, since South Africa is a capital scarce country, it is encouraged to borrow so that there is an increase in the accumulation of capital. However, the later stage of borrowing marked with high debt will lead to subdued economic growth. / SETA