This Master thesis is focused on the fiscal imbalance of the countries of the EMU, which deterioration was a consequence of the financial crisis. Most of the economies had to finance its deficits through the issuance of the sovereign bonds, which are associated with the longterm interest rates. The postcrisis development is characterized by the spread of sovereign bond yields. The thesis focuses on the determinants which have contributed to the spread. Moreover, the thesis discusses proposals for the common issuance of the eurobond which are seen as a solution of the debt market crisis.

Credit spread is the extra risk-reward that an investor is bearing for investing in corporate bonds instead of government bonds. Structural models, which are simple in their framework, fail to explain the occurring credit spread and underestimate the predicted credit spread. Hence, the need for new models and exploration of systematic and idiosyncratic variables arose. The present paper aims to investigate if the predictability of lower-medium investment grade bonds and non-investment grade bonds credit spread can be improved by incorporating systematic and idiosyncratic variables into a fixed effect panel data regression model, and whether the selected variables’ significance has high influence on credit spread or not. Initial results showed that fixed effect panel data regression model underperforms the structural models and under predicts the actual credit spread. The applied model explained 13.5% of the lower-medium investment grade bonds credit spread and 8.5% of non-investment grade bonds. Further, systematic variables have higher influence on lower-medium investment grade bonds and idiosyncratic variables have higher influence on non-investment grade bonds. The predictability of credit spread can be improved by employing correct explanatory variables which are selected based on the characteristics of the sample size.

This thesis analyses the role of the Euromarket, an offshore market for Eurodollars or expatriate US dollars, in the re-emergence of global finance during the 1960s and 1970s. It charts not only its Cold War origins and the development of various markets for Eurodollars, but also institutions and policies that shaped them from the return to convertibility in 1958 to the ill-fated efforts to regulate the nascent market by international financial institutions. By examining the nature of Eurodollars as both a US and global currency, the thesis sheds light on the changing features of the governance of global finance and its relationship with the economic sovereignty of nation-states. It argues that the Euromarket underwent repeated contestations as politicians, bankers, and economists vested their political ambitions and cultural assumptions in it. The popular, academic, and policy debates challenged the speculative nature of Eurodollars which would destabilise the domestic as well as the international monetary system of the Bretton Woods system. Without a single monetary authority, the tendency of the Euromarket to transcend the order of capitalist nation-states constrained national governments’ capacity to control capital flows and the autonomy of domestic monetary policy. However, nation-states were not impotent but deliberately sought to exploit the liquid pool of capital in Eurodollars. It was not merely the US government that benefited from the seigniorage of Eurodollars and the City of London which was reborn as the international financial centre in the Euromarket. Continental European countries that were hesitant about European economic integration, the UK Labour government, developing countries in the Global South, and even the Communist bloc, resorted to the Euromarket for their national interests. The ambivalent attitudes of national governments and their conflict of interests resulted in the failure of coordinated efforts to introduce the rules of the game but facilitated the transnational network of finance in Eurodollars.