Submitted by GUSTAVO OKUYAMA (gus_okuyama@yahoo.com.br) on 2014-09-08T18:50:02Z No. of bitstreams: 1 DISSERTAÇÃO_-_GUSTAVO_PI_OKUYAMA.pdf: 3558280 bytes, checksum: acaa9096fa2c3acd422630503354a330 (MD5) / Approved for entry into archive by JOANA MARTORINI (joana.martorini@fgv.br) on 2014-09-08T19:40:52Z (GMT) No. of bitstreams: 1 DISSERTAÇÃO_-_GUSTAVO_PI_OKUYAMA.pdf: 3558280 bytes, checksum: acaa9096fa2c3acd422630503354a330 (MD5) / Made available in DSpace on 2014-09-08T19:42:44Z (GMT). No. of bitstreams: 1 DISSERTAÇÃO_-_GUSTAVO_PI_OKUYAMA.pdf: 3558280 bytes, checksum: acaa9096fa2c3acd422630503354a330 (MD5) Previous issue date: 2014-08-07 / This study examines how the variables of interest, inflation, exchange rates and economic activity influences the cost of issuing public debt fixed rate bonds in Brazil from 2006 to 2014, for four different maturities. To achieve this objective, variables with constant duration were created, by using the fixed rate costs of bonds in the sovereign debt. The econometric models are based on the estimation of the relation between basic interest rates, exchange rates, inflation, retail sales and the created fixed income bonds, using the autoregressive vector as the statistic model. We have concluded that, the present raise in SELIC implies in fixed rate debt costs decreasing, with the market pricing a future decreasing movement in SELIC. Also, dollar appreciation increases the debt cost in up to one (1) year, in response of a relative local and external interest rate adjusts, and as a possible expectation of a rise in inflation. The increase in inflation generates an interest rate hike in short term, causing interest rates of terms from two and four years to decrease. Retail Sales increase is a response of the market pricing; a need of an interest rate hike in the near future to control the economic activity. / Este trabalho teve como objetivo verificar como as variáveis de juros, inflação, câmbio e atividade econômica influenciam no custo de colocação da dívida pública pré-fixada nos horizontes de um semestre, um, dois e quatro anos. Com este objetivo, empregou-se a construção de variáveis de duration constante a partir das taxas dos títulos pré-fixados da dívida pública. Os modelos possuem como base a estimação da relação entre a taxa básica de juros, taxas de câmbio e de inflação, vendas no varejo e custo da dívida pré-fixada, utilizando como ferramenta estatística o modelo de vetores autorregressivos. Como resultado concluímos que um aumento na taxa básica de juros no presente gera uma queda no custo da dívida pré-fixada, com o mercado precificando um futuro movimento de queda nos juros. Já uma apreciação do dólar impacta negativamente a dívida, de até um ano, pela necessidade de correção da taxa de juros relativa local e estrangeira e como possível resposta a um aumento de inflação. O aumento na inflação gera a necessidade de aumento dos juros básicos em um prazo mais curto, refletindo então na diminuição das taxas pré-fixadas mais longas a partir de dois anos. A consistente resposta à variável vendas no varejo resulta da precificação de um aumento futuro na taxa básica de juros com o objetivo de desaquecer a atividade econômica.

Nesta tese são desenvolvidos três estudos sobre as reservas internacionais brasileiras, utilizando diferentes técnicas econométricas, com o objetivo de determinar a influência de medidas absolutas e relativas de reservas sobre o rating soberano de crédito e o spread soberano, bem como o nível adequado para garantir a liquidez externa. As análises foram feitas com dados mensais do período jan/2000-jun/2008. No primeiro estudo, mostrou-se que diferentes medidas de reservas internacionais apresentam efeito significativo na explicação do rating soberano de crédito, através de modelos ordered logit para a média dos ratings emitidos pelas três principais agências (Moody's, Standard & Poors e Fitch). Entretanto, o indicador de maior poder explicativo não foi o nível absoluto de reservas, mas a razão entre dívida pública externa líquida e PIB. Outras variáveis de destacada importância na maioria dos modelos foram o percentual da dívida interna de curto prazo, investimento estrangeiro direto/PIB e inflação. Variáveis tradicionalmente utilizadas como indicadores de liquidez, como razão reservas/importações e conta corrente/PIB, não foram significativas na maioria dos modelos. Os resultados confirmam os indícios contidos no discurso das agências de rating, quanto à importância das reservas internacionais em sua avaliação, embora alertando que outras variáveis, como perfil de endividamento do governo e perspectivas de crescimento, são também fundamentais. O segundo estudo de caso encontrou relação significativa entre as reservas internacionais e o spread soberano, através de modelos de correção de erros. O efeito estimado do rating soberano foi não-significativo ou pouco explicativo, comparado aos fundamentos, provavelmente devido à volatilidade do spread soberano em resposta a variações nas condições do mercado, ao contrário do rating. O melhor modelo obtido utilizou o nível absoluto de reservas, evidenciando também efeitos significativos da aversão global ao risco, taxas de juros internacionais e crises políticas internas. Os resultados desse estudo indicam custo marginal decrescente das reservas internacionais e a necessidade de considerá-lo endógeno em modelos de minimização de custos para determinação do nível ótimo de reservas. O terceiro estudo implementou a metodologia de Liquidity-at-Risk sugerida por Greenspan (1999) para avaliar a adequação do nível de reservas internacionais para a manutenção da liquidez externa. Para a medida de liquidez reservas/dívida externa de curto prazo (razão de Guidotti), estimou-se que o nível de reservas internacionais mantidas pelo Brasil em jun/2008 (US$200 bilhões) era aproximadamente o dobro do necessário para garantir uma razão de Guidotti superior a 1, com 99% de probabilidade, durante 24, 36 ou 48 meses. Em diversos cenários alternativos de percentual das dívidas externa e interna de curto prazo, meta de superávit primário, índice de aversão ao risco e taxas de juros externas, as reservas iniciais necessárias situaram-se em US$85-105 bilhões. A análise de custos revela que o aumento das reservas diminui os juros médios da dívida, embora efeito maior pudesse ser alcançado através do aumento do superávit primário. As evidências sugerem que a motivação das autoridades brasileiras para a manutenção de reservas em torno de US$200 bilhões não é puramente precaucionária, admitindo as hipóteses de ganho de credibilidade e flexibilidade para a execução da política fiscal. / This thesis developed three case studies on the Brazilian international reserves, using various econometric techniques in order to determine the influence of absolute and relative measures of reserves over both the sovereign credit rating and the sovereign spread, as well as to assess the adequate reserves level to ensure external liquidity. Analyses were carried out on monthly data from Jan/2000 to Jun/2008. The first case study found significant effects of different reserves measures in explaining the sovereign credit rating, by fitting ordered logit models to the average of the ratings issued by the three main agencies (Moody's, Standard & Poors and Fitch) for the Brazilian long term external debt. However, the best explaining variable was not the absolute level of reserves, but the ratio "net public external debt/GDP" instead. It was noteworthy the significance of the following variables in most of the models tested: short term internal debt (%), foreign direct investment/GDP and inflation. Variables traditionally used as external liquidity measures, like reserves/imports and current account/GDP, are not statistically significant in most of the models fitted in this study. Results support the evidence found in the rating agencies' reports, as to the importance of international reserves in their credit quality assessment, although pointing to other variables, like government debt profile and growth perspectives, as equally critical. The second case study found significant relationship between the Brazilian international reserves and its sovereign spread, using error correction models. The estimated effect of sovereign rating was either non-significant, or poorly explanatory when compared to macroeconomic fundamentals, probably due to the volatility of sovereign spread in response to changes in market conditions, unlike the sovereign rating. The best model obtained included the absolute level of reserves, showing also significant effect of the global risk aversion, external interest rates and internal political crises. The results of this study point to a decreasing marginal cost of international reserves and the need of considering it as endogenous in optimal reserves models based in cost minimization. Finally, the third case study implemented the Liquidity-at-Risk methodology suggested by Greenspan (1999), in order to assess the Brazilian reserves level adequacy in maintaining external liquidity. For the liquidity measure adopted - the ratio "reserves/short term external debt" (Guidotti's ratio) - it was found that the Brazilian reserves level held in Jun/2008 (US$200 billion) was roughly twice the necessary one to ensure a Guidotti's ratio above 1, with 99% probability, within 24, 36 or 48 months. In several alternative scenarios varying the short term external debt, short term internal debt, primary surplus, global risk aversion and external interest rates, the required initial reserves was in the range US$85-105 billion. An analysis of alternative policies' costs revealed the expected effect of higher reserves in decreasing the average debt service, although a dramatically higher impact would be obtained by an increase in primary surplus. Evidence suggest that the Brazilian authorities motivation for holding international reserves as high as US$200 billion may not be purely precautionary, pointing to the hypotheses of credibility gains and fiscal flexibility issues.

Nesta tese são desenvolvidos três estudos sobre as reservas internacionais brasileiras, utilizando diferentes técnicas econométricas, com o objetivo de determinar a influência de medidas absolutas e relativas de reservas sobre o rating soberano de crédito e o spread soberano, bem como o nível adequado para garantir a liquidez externa. As análises foram feitas com dados mensais do período jan/2000-jun/2008. No primeiro estudo, mostrou-se que diferentes medidas de reservas internacionais apresentam efeito significativo na explicação do rating soberano de crédito, através de modelos ordered logit para a média dos ratings emitidos pelas três principais agências (Moody's, Standard & Poors e Fitch). Entretanto, o indicador de maior poder explicativo não foi o nível absoluto de reservas, mas a razão entre dívida pública externa líquida e PIB. Outras variáveis de destacada importância na maioria dos modelos foram o percentual da dívida interna de curto prazo, investimento estrangeiro direto/PIB e inflação. Variáveis tradicionalmente utilizadas como indicadores de liquidez, como razão reservas/importações e conta corrente/PIB, não foram significativas na maioria dos modelos. Os resultados confirmam os indícios contidos no discurso das agências de rating, quanto à importância das reservas internacionais em sua avaliação, embora alertando que outras variáveis, como perfil de endividamento do governo e perspectivas de crescimento, são também fundamentais. O segundo estudo de caso encontrou relação significativa entre as reservas internacionais e o spread soberano, através de modelos de correção de erros. O efeito estimado do rating soberano foi não-significativo ou pouco explicativo, comparado aos fundamentos, provavelmente devido à volatilidade do spread soberano em resposta a variações nas condições do mercado, ao contrário do rating. O melhor modelo obtido utilizou o nível absoluto de reservas, evidenciando também efeitos significativos da aversão global ao risco, taxas de juros internacionais e crises políticas internas. Os resultados desse estudo indicam custo marginal decrescente das reservas internacionais e a necessidade de considerá-lo endógeno em modelos de minimização de custos para determinação do nível ótimo de reservas. O terceiro estudo implementou a metodologia de Liquidity-at-Risk sugerida por Greenspan (1999) para avaliar a adequação do nível de reservas internacionais para a manutenção da liquidez externa. Para a medida de liquidez reservas/dívida externa de curto prazo (razão de Guidotti), estimou-se que o nível de reservas internacionais mantidas pelo Brasil em jun/2008 (US$200 bilhões) era aproximadamente o dobro do necessário para garantir uma razão de Guidotti superior a 1, com 99% de probabilidade, durante 24, 36 ou 48 meses. Em diversos cenários alternativos de percentual das dívidas externa e interna de curto prazo, meta de superávit primário, índice de aversão ao risco e taxas de juros externas, as reservas iniciais necessárias situaram-se em US$85-105 bilhões. A análise de custos revela que o aumento das reservas diminui os juros médios da dívida, embora efeito maior pudesse ser alcançado através do aumento do superávit primário. As evidências sugerem que a motivação das autoridades brasileiras para a manutenção de reservas em torno de US$200 bilhões não é puramente precaucionária, admitindo as hipóteses de ganho de credibilidade e flexibilidade para a execução da política fiscal. / This thesis developed three case studies on the Brazilian international reserves, using various econometric techniques in order to determine the influence of absolute and relative measures of reserves over both the sovereign credit rating and the sovereign spread, as well as to assess the adequate reserves level to ensure external liquidity. Analyses were carried out on monthly data from Jan/2000 to Jun/2008. The first case study found significant effects of different reserves measures in explaining the sovereign credit rating, by fitting ordered logit models to the average of the ratings issued by the three main agencies (Moody's, Standard & Poors and Fitch) for the Brazilian long term external debt. However, the best explaining variable was not the absolute level of reserves, but the ratio "net public external debt/GDP" instead. It was noteworthy the significance of the following variables in most of the models tested: short term internal debt (%), foreign direct investment/GDP and inflation. Variables traditionally used as external liquidity measures, like reserves/imports and current account/GDP, are not statistically significant in most of the models fitted in this study. Results support the evidence found in the rating agencies' reports, as to the importance of international reserves in their credit quality assessment, although pointing to other variables, like government debt profile and growth perspectives, as equally critical. The second case study found significant relationship between the Brazilian international reserves and its sovereign spread, using error correction models. The estimated effect of sovereign rating was either non-significant, or poorly explanatory when compared to macroeconomic fundamentals, probably due to the volatility of sovereign spread in response to changes in market conditions, unlike the sovereign rating. The best model obtained included the absolute level of reserves, showing also significant effect of the global risk aversion, external interest rates and internal political crises. The results of this study point to a decreasing marginal cost of international reserves and the need of considering it as endogenous in optimal reserves models based in cost minimization. Finally, the third case study implemented the Liquidity-at-Risk methodology suggested by Greenspan (1999), in order to assess the Brazilian reserves level adequacy in maintaining external liquidity. For the liquidity measure adopted - the ratio "reserves/short term external debt" (Guidotti's ratio) - it was found that the Brazilian reserves level held in Jun/2008 (US$200 billion) was roughly twice the necessary one to ensure a Guidotti's ratio above 1, with 99% probability, within 24, 36 or 48 months. In several alternative scenarios varying the short term external debt, short term internal debt, primary surplus, global risk aversion and external interest rates, the required initial reserves was in the range US$85-105 billion. An analysis of alternative policies' costs revealed the expected effect of higher reserves in decreasing the average debt service, although a dramatically higher impact would be obtained by an increase in primary surplus. Evidence suggest that the Brazilian authorities motivation for holding international reserves as high as US$200 billion may not be purely precautionary, pointing to the hypotheses of credibility gains and fiscal flexibility issues.

La présente thèse traite la modélisation mathématique des risques souverains et ses applications.Dans le premier chapitre, motivé par la crise de la dette souveraine de la zone euro, nous proposons un modèle de risque de défaut souverain. Ce modèle prend en compte aussi bien le mouvement de la solvabilité souveraine que l’impact des événements politiques critiques, en y additionnant un risque de crédit idiosyncratique. Nous nous intéressons aux probabilités que le défaut survienne aux dates d’événements politiques critiques, pour lesquelles nous obtenons des formules analytiques dans un cadre markovien, où nous traitons minutieusement quelques particularités inhabituelles, entre autres le modèle CEV lorsque le paramètre d’élasticité β >1. Nous déterminons de manière explicite le processus compensateur du défaut et montrons que le processus d’intensité n’existe pas, ce qui oppose notre modèle aux approches classiques. Dans le deuxième chapitre, en examinant certains modèles hybrides issus de la littérature, nous considérons une classe de temps aléatoires dont la loi conditionnelle est discontinue et pour lesquels les hypothèses classiques du grossissement de filtrations ne sont pas satisfaites. Nous étendons l’approche de densité à un cadre plus général, où l’hypothèse de Jacod s’assouplit, afin de traiter de tels temps aléatoires dans l’univers du grossissement progressif de filtrations. Nous étudions également des problèmes classiques : le calcul du compensateur, la décomposition de la surmartingale d’Azéma, ainsi que la caractérisation des martingales. La décomposition des martingales et des semi-martingales dans la filtration élargie affirme que l’hypothèse H’ demeure valable dans ce cadre généralisé. Dans le troisième chapitre, nous présentons des applications des modèles proposés dans les chapitres précédents. L’application la plus importante du modèle de défaut souverain et de l’approche de densité généralisée est l’évaluation des titres soumis au risque de défaut. Les résultats expliquent les sauts négatifs importants dans le rendement actuariel de l’obligation à long terme de la Grèce pendant la crise de la dette souveraine. La solvabilité de la Grèce a tendance à s’empirer au fil des années et le rendement de l’obligation a des sauts négatifs lors des événements politiques critiques. En particulier, la taille d’un saut dépend de la gravité d’un choc exogène, du temps écoulé depuis le dernier événement politique, et de la valeur du recouvrement. L’approche de densité généralisée rend aussi possible la modélisation des défauts simultanés qui, bien que rares, ont un impact grave sur le marché. / This dissertation deals with the mathematical modelling of sovereign credit risk and its applications. In Chapter 1, motivated by the European sovereign debt crisis, we propose a hybrid sovereign risk model which takes into account both the movement of the sovereign solvency and the impact of critical political events besides the idiosyncratic credit risk. We are interested in the probability that the default occurs at critical political dates, for which we obtain closed-form formulae in a Markovian setting, where we deal with some unusual features, such as a treatment of the CEV model when the elasticity parameter β > 1. We compute explicitly the compensator process of default and show that the intensity process does not exist. In Chapter 2, by studying certain hybrid models in literature on credit risks, we consider a type of random times whose conditional probability distribution is not continuous and by which standard intensity and density hypotheses in the enlargement of filtrations are not satisfied. We propose a generalised density approach, where the hypothesis of Jacod is relaxed, in order to deal with such random times in the framework of progressive enlargement of filtrations We also study classic problems such as the computation of the compensator process of the random time, the decomposition of the Azéma supermartingale, as well as the martingale characterisation. The martingale and semimartingale decompositions in the enlarged filtration show that the H’-hypothesis holds in this generalised framework. In Chapter 3, we display several applications of the models proposed in the previous chapters. The most important application of the hybrid default model and the generalised density approach is the valuation of default claims. The results explain the significant negative jumps in the long-term Greek government bond yield during the sovereign debt crisis. The solvency of Greece tends to fall gradually through time and the bond yield has negative jumps when critical political events are held. In particular, the size of a jump depends on the seriousness of an exogenous shock, the elapsed time since the last political event, and the value of the recovery payment. The generalised density approach also makes possible the modelling of simultaneous defaults, which are rare but may have an important impact.

Šis magistro baigiamasis darbas skirtas investuotojų apsaugos mechanizmų analizei valstybės nemokumo atveju. Remiamasi klasikine valstybės imuniteto sąvoka, kuri teigia, kad valstybė turi suvereną ir negali būti patraukta teisminiams procesams. Tačiau Lietuva, kaip ir kitos užsienio valstybės, atsisako valstybės imuniteto ir dalyvauja finansų rinkoje, kaip lygiateisis subjektas. Investuotojas, kuris investuoja į valstybės vertybinius popierius ir dalyvauja finansų rinkoje, turi būti ypatingai ginamas, nes bet kuriuo atveju, jis išlieka silpnoji santykių šalis. Pasaulio praktika parodė, kad valstybei tapus nemokiai, ji negalinti įvykdyti prisiimtų finansinių įsipareigojimų kreditoriams, t.y. stambiems užsienio ir vietiniams bankams ir investuotojams, turtintiems šios šalies obligacijų ar kitų skolos vertybinių popierių. Pagrindiniai veiksniai, lemiantys valstybės sprendimą pasiskelbti nemokia, yra per didelis valstybės įsiskolinimas, lėtas ekonomikos augimas. Susidarius tokiai situacijai, valstybė teikia skolos restruktūrizavimo pasiūlymą investuotojams, siekdama pakeisti obligacijų sąlygas arba atidėti išpirkimo terminus. Magistriniame darbe plačiai analizuojama investuotojų teisės, kai valstybė siekia restruktūrizuoti skolą. Taigi, kai valstybė negali išmokėti obligacijų turėtojams nominalios jų turimų obligacijų vertės, ji teikia pasiūlymą pakeisti turimas obligacijas į naujas restruktūrizuotąsias obligacijas ir kitos rūšies kompensacijas. Lietuvai, kaip Europos Sąjungos... [toliau žr. visą tekstą] / This Master‘s thesis is dedicated to the analysis of investor protection mechanisms in case of state insolvency. The classic notion of state immunity provides that a state is the sovereign that is immune from judicial proceedings. However, Lithuania as well as other states waive the sovereign immunity and participate in financial markets as equal entities. Contractual relationship forms between a state and an investor who has purchased debt securities issued by the state. An investor who invests into the state securities and participates in the financial market shall be entitled to special protection, as he remains the weaker party to the relations in any case. The thesis has analysed interpretation of the notion of sovereign insolvency in international law; however, no such notion has been found. The research has shown that this notion is construed as a state’s incapacity to comply with its financial liabilities. Thus, according to the world’s practice, if a state has become insolvent, it is incapable of complying with the assumed financial liabilities to its creditors, i.e. high profile foreign and local banks and investors holding bonds or other debt securities of the state. Key factors determining a state’s resolution to proclaim own insolvency are excessive indebtedness of the state, slow economic growth. State’s insolvency and incapacity to comply with the assumed liabilities as well as debt restructuring have negative effects on financial markets, given that the... [to full text]

We analyze how the impact of a change in the sovereign debt-to-GDP ratio on economic growth depends on the level of debt, the stress level on the financial market and the membership in a monetary union. A dynamic growth model is put forward demonstrating that debt affects macroeconomic activity in a non-linear manner due to amplifications from the financial sector. Employing dynamic country-specific and dynamic panel threshold regression methods, we study the non-linear relation between the growth rate and the debt-to-GDP ratio using quarterly data for sixteen industrialized countries for the period 1981Q1-2013Q2. We find that the debt-to-GDP ratio has impaired economic growth primarily during times of high financial stress and only for countries of the European Monetary Union and not for the stand-alone countries in our sample. A high debt-to-GDP ratio by itself does not seem to necessarily negatively affect growth if financial markets are calm. (authors' abstract) / Series: Department of Economics Working Paper Series

We analyze how the impact of a change in the sovereign debt-to-GDP ratio on economic growth depends on the level of debt, the stress level on the financial market and the membership in a monetary union. A dynamic growth model is put forward demonstrating that debt affects macroeconomic activity in a non-linear manner due to amplifications from the financial sector. Employing dynamic country-specific and dynamic panel threshold regression methods, we study the non-linear relation between the growth rate and the debt-to-GDP ratio using quarterly data for sixteen industrialized countries for the period 1981Q1-2013Q2. We find that the debt-to-GDP ratio has impaired economic growth primarily during times of high financial stress and only for countries of the European Monetary Union and not for the stand-alone countries in our sample. A high debt-to-GDP ratio by itself does not seem to necessarily negatively affect growth if financial markets are calm. (authors' abstract)

La tesi intende fornire un’analisi critica dello sviluppo dell’Unione Economica e Monetaria (UEM) alla luce della crisi del debito sovrano. A partire dal 2009 sono state progressivamente attuate diverse riforme che hanno limitato l’autonomia degli Stati Membri nell’esercizio delle loro prerogative sovrane ed hanno fornito alle istituzione europee nuovi poteri nell’ambito di diverse politiche. La ricerca investiga i trasferimenti di sovranità in corso dal livello nazionale a quello europeo focalizzandosi sulle trasformazioni sia dell’Unione Economica che di quella Monetaria. Nel primo capitolo la tesi analizza i carattere originali dell’UEM dalla sua creazione fino alla ratifica del trattato di Lisbona. Il secondo capitolo considera la creazione dei meccanismi di stabilizzazione introdotti per salvare i paesi a rischio default e garantire la stabilità finanziaria della zona euro nel suo complesso. Il terzo capitolo studia gli interventi della Banca Centrale Europea durante la crisi, analizzando in che modo la necessità di proteggere la moneta unica abbia sviluppato il ruolo della BCE ed esteso il suo mandato. Il quarto capitolo studia la riforma della governance economica tramite il rafforzamento della disciplina fiscale degli Stati Membri. Il quinto capitolo analizza la riforma della governance bancaria e la creazione dell’Unione Bancaria, che è stata finalmente introdotta per interrompere il circolo vizioso tra crisi del debito e crisi bancaria. Nello sviluppo della tesi le diverse riforme verranno analizzate dal punto di visto della loro legalità, efficacia e legittimità democratica. / The thesis aims to provide a critical analysis of the development of the Economic and Monetary Union (EMU) in the light of the sovereign debt crisis. Since 2009 a number of measures have been progressively implemented, which have limited the autonomy of Member States in exercising their sovereign prerogatives and have granted EU institutions new powers in key policy areas. The research will investigate the ongoing transfers of sovereignty from national to European level focusing on the transformation of both the Economic and the Monetary Union. In the first chapter, it will consider the original features of the EMU, from its introduction at the intergovernmental conference of Maastricht until the ratification of the Lisbon Treaty. The second chapter will focus on the creation of rescue and stabilization mechanisms put in place to save Member States from imminent default and to ensure the financial stability of the Eurozone as a whole. The third chapter will study the interventions of the European Central Bank during the crisis considering how the necessity to protect the single currency has developed its role and extended its mandate. The fourth chapter will focus on the reform of the economic governance through the fiscal discipline of Member States. The fifth chapter will take into consideration the reform of the banking governance and the establishment of the European Banking Union, which was finally introduced to stop the vicious cycle between the debt and banking crisis. By developing the thesis, the analysis will consider each reform from the point of view of its legality, effectiveness and democratic legitimacy.

In this thesis, we aim to find the effect of economic crisis announcements arising from the US subprime mortgage crisis and European sovereign debt crisis on the market volatility in theBRIC countries. We implement a GARCH model in order to compare the effect of individual news announcements and find that the US crisis had a bigger impact on BRIC market volatility than the European crisis. Of particular note, we find the US bailout had a higher impact than the failure of Lehman Brothers or any European crisis dates that were considered. We then examine the volatility transmission mechanism by implementing a VAR model to create a spillover index. Following, we apply a rolling window approach, creating spillover plots which show that both return and volatility spillovers are affected by crisis announcements. The importance of our results are related to investor decision making, particularly the relationship between market return and risk in developing country markets. Far to our knowledge, no recent literature has compared the two crises in the way we have nor with the datasets we have used.

This thesis deals with the relationship between yield spreads on the sovereign bonds and their determinants with a primary focus on the Czech Republic. First, a homogeneous panel of Visegrad group countries (V4) was investigated by the pooled mean group (PMG) method of Pesaran et al. (1998). It was found that debt-to-gdp ratio along with VIX, the "fear gauge", are the main factors driving the spread dynamics in the V4 group. Based on the results from PMG estimation, we estimate a three-dimensional vector autoregression (VAR) model and structural VAR (SVAR) model in order to observe spread reactions on external shocks. Among the V4 group countries, Hungary exhibits the largest spread response to a VIX shock. Overall, the (S)VAR results confirmed that countries with higher levels of yields before crisis had also a stronger reaction to the market disturbances during 2007-2009. Furthermore, it was found that for the period 2010-2013, the standard model (macroeconomic fundamentals plus global risk aversion factors) provided less reliable results. As a remedy, financial soundness indicators were incorporated into the VAR model. We conclude that it is important to take into account country's financial sector vulnerabilities when describing the spread dynamics since 2010.