Do markets believe in austerity? Did they ever believe?
| Název práce v češtině: | Věří trhy v úsporná opatření? Věřily vůbec někdy? |
|---|---|
| Název v anglickém jazyce: | Do markets believe in austerity? Did they ever believe? |
| Klíčová slova: | Oznámení fiskální politiky, konsolidační opatření, politická komunikace, úrokové sazby, globální finanční krize |
| Klíčová slova anglicky: | Fiscal policy announcements, Consolidation measures, Political communication, Interest spreads, Global financial crisis |
| Akademický rok vypsání: | 2018/2019 |
| Typ práce: | diplomová práce |
| Jazyk práce: | angličtina |
| Ústav: | Institut ekonomických studií (23-IES) |
| Vedoucí / školitel: | PhDr. Jaromír Baxa, Ph.D. |
| Řešitel: | skrytý - zadáno vedoucím/školitelem |
| Datum přihlášení: | 31.01.2019 |
| Datum zadání: | 31.01.2019 |
| Datum a čas obhajoby: | 17.06.2020 09:00 |
| Datum odevzdání elektronické podoby: | 05.05.2020 |
| Datum proběhlé obhajoby: | 17.06.2020 |
| Oponenti: | PhDr. Michal Hlaváček, Ph.D. |
| Kontrola URKUND: | |
| Zásady pro vypracování |
| The government spending affects the economic growth. Its borrowing capabilities may be particularly precious during recessions in which other sectors may be short of available funding. In such periods, governments may introduce various facilities such as guarantee and bailout schemes and other supporting programs to secure institutions and households against a default.
However, governments themselves are subjects of borrowing constraints since the international market assesses an ability to satisfy their present and future debt obligations. Governments are not risk-free: in turn for the increased risk, creditors demand higher yields for issued bonds. The prime strategy to strengthen their credibility against possible default consists of fiscal consolidations which may be performed in two basic ways: tax increases and reductions of government spending. The market response to government’s austerity signals is important as it shows their attitude towards such actions. This is particularly relevant in crisis periods. If markets are indifferent, governments may rather focus on efforts aiming to stabilize the economy without a special interest to theirs increased debt. Based on this conjectures, we will focus on fiscal consolidation (austerity) announcements to study the market reaction for possible policy implications. We are particularly interested whether: • markets do respond to austerity measures and consequently demand lower yields on issued sovereign bonds • there are any periods in which markets do respond differently The process leading to the final legal act takes quite a long time in which markets may adjust their pricings with respect to the expected outcome sooner. The final decision date for austerity measures may be thus insignificant. Therefore, we also find important to study whether more regular comments of governmental representatives have similar effects as the final decisions. |
| Seznam odborné literatury |
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• Afonso, A., Strauch, R. (2007): ‘Fiscal policy events and interest rate swap spreads: Evidence from the EU’, Journal of International Financial Markets, Institutions and Money. North-Holland, 17(3), pp. 261–276. • Beetsma, R., Giuliodori, M., de Jong, F., Widijanto., D. (2013): ‘Spread the news: The impact of news on the European sovereign bond markets during the crisis’, Journal of International Money and Finance. Pergamon, 34, pp. 83–101. • Boffelli, S., Urga, G. (2015): ‘Macroannouncements, bond auctions and rating actions in the European government bond spreads’, Journal of International Money and Finance. Pergamon, 53, pp. 148–173. • Büchel, K., (2013): ‘Do words matter? The impact of communication on the PIIGS’ CDS and bond yield spreads during Europe’s sovereign debt crisis’, European Journal of Political Economy. North-Holland, 32, pp. 412–431. • De Jong, J. (2018): ‘The effect of fiscal announcements on interest spreads: Evidence from the Netherlands’, DNB Working Paper. 584. Amsterdam. • Drago, D. and Gallo, R. (2016): ‘The impact and the spillover effect of a sovereign rating announcement on the euro area CDS market’, Journal of International Money and Finance. Pergamon, 67, pp. 264–286. • Falagiarda, M., Reitz, S. (2015): “Announcements of ECB unconventional programs: Implications for the sovereign spreads of stressed euro area countries.” Journal of International Money and Finance, 53, 276–295. • Knot, K. and De Haan, J. (1999): ‘Deficit announcements and interest rates: Evidence for Germany’, Journal of Policy Modeling. North-Holland, 21(5), pp. 559–577. |
| Předběžná náplň práce |
| Methodology:
In order to capture effects of austerity announcements, we will construct unique news dataset which will consist of governmental announcements for European countries in the period of 2000 – 2019. As such, the dataset will enable us to study different time periods across the economic cycle and capture possible changes in market responses. Furthermore, we will try to decrease the selection bias and study larger set of announcements. More regular news may produce different outcomes then restrictive choice of only most relevant events. Since we are mainly interested in common market reactions, we will study the effects using panel data in first differences. Thanks to that we will be able to analyze impacts across multiple countries at the same time. To capture possible different effects across each country, we will divide the dataset into various sub-groups. Expected Contribution: Using unique news dataset will show how more regular announcements affect yield spreads contrary to existing practice which is very restrictive. Furthermore, we will study a much larger time period which enables us to capture different market responses throughout the economic and financial cycle. 1. Introduction 2. Literature review 3. Estimation approach and Data Used Method Construction of Announcement Dataset Control variables selection 4. Results 5. Conclusion |
| Předběžná náplň práce v anglickém jazyce |
| Methodology:
In order to capture effects of austerity announcements, we will construct unique news dataset which will consist of governmental announcements for European countries in the period of 2000 – 2019. As such, the dataset will enable us to study different time periods across the economic cycle and capture possible changes in market responses. Furthermore, we will try to decrease the selection bias and study larger set of announcements. More regular news may produce different outcomes then restrictive choice of only most relevant events. Since we are mainly interested in common market reactions, we will study the effects using panel data in first differences. Thanks to that we will be able to analyze impacts across multiple countries at the same time. To capture possible different effects across each country, we will divide the dataset into various sub-groups. Expected Contribution: Using unique news dataset will show how more regular announcements affect yield spreads contrary to existing practice which is very restrictive. Furthermore, we will study a much larger time period which enables us to capture different market responses throughout the economic and financial cycle. 1. Introduction 2. Literature review 3. Estimation approach and Data Used Method Construction of Announcement Dataset Control variables selection 4. Results 5. Conclusion |