The purpose of this thesis is to identify key factors underlying exchange rate developments during the European sovereign debt crisis by examining the impact of credit rating news, published by the three leading credit rating agencies, on conditional returns and volatility of EUR/USD (direct quotation) exchange rate. Empirical results highlight the importance of interest rate differential and volatility index of options exchange in explaining EUR/USD exchange rate volatilities. Downgrade announcements by Standard & Poor’s as well as watch revisions by Fitch Ratings had a detrimental impact on the value of Euro, leading to a subsequent Euro depreciation over the period under consideration (January 2009 – April 2012).

Suicide rates in Greece (and other European countries) have been on a remarkable upward trend following the global recession of 2008 and the European sovereign debt crisis of 2009. However, recent investigations of the impact on Greek suicide rates from the 2008 financial crisis have restricted themselves to simple descriptive or correlation analyses. Controlling for various socio-economic effects, this study presents a statistically robust model to explain the influence on realised suicidality of the application of fiscal austerity measures and variations in macroeconomic performance over the period 1968-2011. The responsiveness of suicide to levels of fiscal austerity is established as a means of providing policy guidance on the extent of suicide behaviour associated with different fiscal austerity measures. The results suggest (i) significant age and gender specificity in these effects on suicide rates and that (ii) remittances have suicide-reducing effects on the youth and female population. These empirical regularities potentially offer some guidance on the demographic targeting of suicide prevention measures and the case for 'economic' migration. (authors' abstract)

This paper looks at the determinants of bond yields for a select group of Eurozone countries, during the European sovereign debt crisis. In addition to traditional determinants of spreads, which include credit risk, liquidity risk and international risk aversion, this paper looks at the role of credit rating agencies. The movements of countries’ yields during the debt crisis played an integral role in the resulting bailouts by the European Union. Using expected data published by the European Commission, the results of the model were in line with current literature, with the exception of the effect of budget deficits. One interpretation of the conflicting results is that during a debt crisis what market participants care about is growth, not austerity. Including the effect of credit ratings showed that credit ratings have high predictive power.

This research aims to explain mechanisms of the new twin crisis, the influence of such a crisis on European integration, and identify indicators that can predict such a twin crisis. First, the old and the new twin crisis will be explained and the necessity of this research will be elaborated upon. Hereafter, the main mechanisms of the new twin crisis will be identified based on a literature review. From this literature review a set of indicators, accompanied by certain thresholds, will be created that can indicate that a twin crisis is about to happen. These indicators will be used to analyse data from 1970 until 2015 to asses whether this new twin crisis has occured in the past and what its political consequences were. The constructed mechanism to explain the new twin crisis and the list of indicators will be put to the test by conducting an indepth case study of Italy and its risk of encountering a new twin crisis. Based on the model that links the new twin crisis to political consequences, the case study attempts to link the new twin crisis to the European integration project. This research will lay the foundation for the creation of predictive models for the new twin crisis and provide insights in one of the main destabilisers for European integration. It therefore establishes a set-up and lay-out for future research in this specific field.

European integration is a unique project, based on which, after centuries of war, Europe commenced economic and political cooperation. However, as it is shown particularly in recent years, European diversity, either in terms of language, cultural background or economic development, is so present, that what is beneficial for some Member States of the European Union, may not necessarily be beneficial for all Member States of the European Union. After less than 20 years since the establishment of the European Union, we are witnessing the convergence process, which is far from finished, nevertheless it already encountered problems that will be faced many more years. While the most developed and the richest Member States continuously contribute to the EU budget, the other Member States, especially in southern Europe, they are still in the position of recipients of financial help. The recent development shows that the process of catching up is not as fast as expected, but it is very expensive. The introduction of economic and monetary union, on such a large and diverse territory proves to be short-sighted, mainly due to the absence of sufficient coordination of the fiscal policies executed by each of the Member States.

This diploma thesis describes the formation of The European monetary union, financial situation of the member countries before the start of the debt crisis in eurozone. The thesis focuses on the PIIGS countries, which includes Portugal, Ireland, Italy, Greece and Spain. Consequently it deals with the course of the debt crises, the financial support provided to PIIGS countries and possibilities of the future development of the EU, respectively eurozone.

The paper empirically tests the relationship between earnings volatility and cost of debt with a sample of more than 77,000 Swedish limited companies over the period 2006 to 2013 observing more than 677,000 firm years. As called upon by many researchers recently that there is very limited evidence of the association between earnings volatility and cost of debt this paper contributes greatly to the existing literature of earnings quality and debt contracts, especially on the consequence of earnings quality in the debt market. Earnings volatility is a proxy used for earnings quality while cost of debt is a component of debt contract. After controlling for firms’ profitability, liquidity, solvency, cashflow volatility, accruals volatility, sales volatility, business risk, financial risk and size this paper studies the effect of earnings volatility measured by standard deviation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) on Cost of Debt. Overall finding suggests that lenders in Sweden does take earnings volatility into consideration while determining cost of debt for borrowers. But a deeper analysis of various industries suggest earnings volatility is not consistently used by lenders across all the industries. Lenders in Sweden are rather more sensitive to borrowers’ financial risk across all the industries. It may also be stated that larger borrowers tend to secure loans at a lower interest rate, the results are consistent with majority of the industries. Swedish debt market appears to be well prepared for financial crises as the debt crisis seems to have no or little adverse effect borrowers’ cost of capital. This study is the only empirical evidence to study the association between earnings volatility and cost of debt. Prior indirect research suggests earnings volatility has a negative effect on cost debt (i.e. an increase in earnings volatility will increase firm’s cost of debt). Our direct evidence from the Swedish debt market is consistent for some industries including media, real estate activities, transportation & warehousing, and other consumer services.

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.

The first part of this dissertation examines the presence of the financial contagion across European stock markets with respect to the Greece sovereign debt crisis by estimating the time-varying conditional correlations of stock returns between Greece and other European countries over 2001 to 2012. We find that the correlations vary over time and reach the peaks in the late 2008 during theU.S.subprime crisis, and in the beginning of 2010 of the height of European debt crisis. Further, the correlations between stock index returns of Greece and Spain, France, Ireland, Netherlands are significantly increased by Greek sovereign credit rating downgrade announcements. The second part of this dissertation examines the correlations of gold, dollar and U.S. stock returns over 2001 to 2012 using ADCC-GARCH model. The conditional correlations of gold-dollar returns are negative during all sub-sample periods and significantly increase in magnitude during both subprime crisis and sovereign debt crisis. The conditional correlations of gold-stock returns are positive on average over time. However, gold-stock correlation falls below zero during subprime crisis and sovereign debt crisis. Gold-stock correlation is significantly negatively affected by positive CPI announcements. And gold-dollar correlation is significantly negatively affected by negative GDP announcements and positive unemployment announcements. The effects of macroeconomic announcements are stronger during economic recessions.