EU or Euro Area Crisis? Studying Differentiated Integration as an Idea Structuring Elite Perceptions of the Sovereign Debt and the COVID-19 crisis

After the sovereign debt crisis, scholars concluded that euro area member states (EAMS) and non-EAMS embarked on diverging paths of integration. Yet, their united response countering the economic consequences of the COVID-19 crisis contradicts the path-dependency argument. This article takes an ideational approach. It demonstrates that the different crisis outcomes regarding differentiated integration (DI) in Economic and Monetary Union (EMU) coincide with variations of how DI influenced elite crisis perceptions as an idea. While policymakers perceived the sovereign debt crisis as a currency area crisis with threats and spillovers applying to EAMS, they interpreted the COVID-19 crisis as a health emergency threatening all EU member states. These differences in elite crisis perceptions facilitated different outcomes regarding DI despite unchanged economic and fiscal circumstances among EAMS and non-EAMS. The findings challenge deterministic assumptions on the self-reinforcing nature of DI in EMU and establish DI as an idea structuring elite perceptions. [ FROM AUTHOR] Copyright of Journal of European Integration is the property of Routledge and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full . (Copyright applies to all s.)

The Economic Impact of COVID-19 Crisis Based on Complex Network Evolution Model

The Covid-19 crisis impacts the economy with non-equilibrium and non-linear shocks. This paper builds a trading network model based on the theory of trading economics. Using the network model, the evolutionary procedure of the economic depression triggered by the shocks are researched. The study shows that under the impact of shocks, small and medium-sized trading agents with weak profitability will first experience cash flow crisis. Then the crisis contagion is formed in upstream and downstream through the trading network. The credit reduction caused by the business deterioration will make the interest rate in the economy increase and promote each other with the bankruptcy of trading entities. Eventually, it leads to the feedback loop in liquidity crisis and debt crisis, which accelerates the bankruptcy of enterprises and possibly causing a debt crisis in the banking sector. It is found that after the shock, the economic recovery may take three patterns: stable recovery, slow recession and secondary crisis. Finally, the paper proposes relevant policy recommendations to reduce the impact of the crisis. © 2023 Editorial Borad of Complex Systems and Complexity Science. All rights reserved.

How could a new universal code of conduct prevent and resolve sovereign debt crises? Proposals for design and implementation

In response to the COVID‐19 crisis, government spending around the world has increased significantly and will continue to grow as interest rates rise. In view of protracted and costly sovereign debt restructurings in the previous decades, contractual and noncontractual instruments of the Global Debt Governance‐system have been insufficient to prevent and to resolve sovereign debt crisis. While statutory and comprehensive approaches to resolve sovereign debt crises lack the political support such as an insolvency procedure for states incomprehensive contractual approaches including collective action clauses (CACs) cannot fully secure a comprehensive debt resolution. Codes of conduct could constitute an essential instrument to contribute to preventing and resolving sovereign debt crises. There are two main impediments for establishing and adopting such codes of conduct effectively. First, a range of codes of conduct with different institutional settings and principles have been established − and partly implemented − including those of the Institute of International Finance, the United Nations, the G20, the IMF and the OECD. However, differing institutional settings do not contribute to preventing or effectively resolving debt crises when the actors concerned apply different codes of conduct. We suggest a new universal code of conduct in which the elements of the various proposals made by the public and private sectors would be combined. Second, the global economic governance structure lacks incentives for creditors and debtors to adhere to this new universal code of conduct. This paper proposes measures providing incentives for creditors and debtors to apply the nonstatutory code of conduct.

Asymmetric volatility spillover among global oil, gold, and Chinese sectors in the presence of major emergencies

The volatility of international crude oil and gold markets has affected stock markets through several economic channels, and the impact tends to be more evident with the appearance of emergencies. However, the volatility linkages between commodities and Chinese sector stocks in the presence of emergencies are understudied. To examine the asymmetric relationship and time-varying connectedness between commodities and Chinese sector stocks, this paper first employs GJR-GARCH to capture the realized volatility of international oil, gold, and Chinese sector stocks. Secondly, we decompose the realized volatility of international oil and gold into bad and good volatility and then employ the TVP-VAR-DY approach to obtain the connectedness index. The final result shows asymmetric volatility spillover among oil, gold, and Chinese sector stocks. During the COVID-19 outbreak, the gold good volatility transmission is intenser than bad volatility. Thirdly, the analysis is also carried out under different subperiods. They include three international events: the global financial crisis and the European debt crisis, the oil crisis, and COVID-19. The result reveals heterogeneity exists in the impact of international oil and gold on the Chinese sector stocks under different emergencies. These findings are of great significance for policymakers to improve the sector management under the impact of different emergencies and for investors to design diversified portfolios according to the commodity-sector risk spillover effects. © 2023 Elsevier Ltd

Hidden causality between oil prices and exchange rates

This work investigates the interactions between oil prices and exchange rates of 6 typical oil importers (China, Japan, and India) and exporters (Canada, Russia, and Saudi Arabia) from 2006 to 2022. We employ a novel method to capture their causal interactions, namely pattern causality, and compare the results to that based on the volatility spillover method. The empirical analysis supports most existing findings that oil prices are bidirectional correlated with exchange rates. However, unlike previous studies that only investigate positive and negative causalities, we highlight dark causality as a more complex interaction. Moreover, dark causality suggests that successive increases (decreases) in oil prices tend to drive the exchange rates of oil exporters to act in an oscillatory manner rather than in a purely positive or opposite trend, and vice versa. Furthermore, we also reveal that dark causality shows dominance during crises, e.g., the global financial crisis, the European debt crisis, the epidemic of COVID-19, and the Russia-Ukraine conflict. Revealing three types of causalities between oil prices and exchange rates helps policymakers develop more diversified macroeconomic policies. Moreover, the newly identified dark causality can be a useful indicator for investors to risk management. © 2023

The Covid-19 Crisis: Global Competitive (Geo)Politics, Labour Regimes and the Case of Greece

The Covid-19 pandemic, seen in the form of a historical continuum of crises in the Euro-Atlantic core after the global financial crisis and the Eurozone crisis, has undermined the fundamentals of neo-ordo-liberal globalisation and the so-called "4th industrial revolution”. Whilst underlining the relative decline of the USA and, more broadly, the Euro-Atlantic economies, the measures undertaken by the states of the global North for dealing with the pandemic increase global (geo) political competition. Further, these measures only marginally protect labour conditions despite immense injections of cash into economy. As a result of these measures, public debt has increased, especially in Greece. This article outlines the implications of the pandemic upon global (geo)politics and labour regimes and pays particular attention to the case of Greece, the weakest economy in the Eurozone. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.

Explaining the response of the ECB to the COVID-19 related economic crisis: inter-crisis and intra-crisis learning

The economic effects of the Covid-19 pandemic have placed a renewed strain on the economic governance of the European Union (EU). The European Central Bank (ECB) was a key player in the EU's response to the crisis induced by the pandemic. This paper adopts a theoretical approach focused on policy learning to explain how and why the ECB responded to the crisis in 2020–2021. By drawing on speeches, newspaper articles and interviews with policy-makers, the paper finds that the ECB was able to rely on earlier crisis experiences in the euro area in forming its response to the pandemic crisis. Although the sovereign debt crisis and the pandemic crisis had both similarities and differences from one another, the ECB was able to engage in inter-crisis and intra-crisis learning. Its learning concerned objectives, instruments as well as an awareness that timely and forceful response was crucial, so that the member states and other EU institutions had time to act. [ABSTRACT FROM AUTHOR] Copyright of Journal of European Public Policy is the property of Routledge and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Bubble contagion effect between the main precious metals

Purpose: This study examines the extent to which gold and silver bubbles are correlated and which metal's bubble spills over to the other. In addition, the overlap in bubble-like episodes for the two metals is demonstrated and the influence of crises (global financial crises, European debt crisis and the COVID-19 pandemic) on the development of these episodes is compared. Design/methodology/approach: This study proposes a two-step approach. In the first step, price bubbles are identified based on the backward sup augmented Dickey–Fuller of Phillips et al. (2015a, 2015b) and modified by Phillips and Shi (2018). In the second step, the correlation in the contagion effect of the bubbles between the two precious metal prices is measured using a nonparametric regression with a time-varying coefficient approach developed by Greenaway-McGrevy and Phillips (2016). Findings: The findings suggest that the safe-haven property of gold and silver during financial market turbulence induces excessive price increases beyond their fundamental values. Furthermore, the results indicate that bubbles are contagious among precious metal markets and flow mainly from gold to silver;these findings are associated with the period after 2005, particularly during the global financial crisis. A contagious bubble effect is not found between gold and silver during the coronavirus disease 2020 pandemic. Practical implications: The results suggest that financial market participants should consider portfolio weights in precious markets in light of the bubble correlation between gold and silver, especially during crises. Originality/value: To the best of the authors' knowledge, this is the first study that explores the correlation of bubble-like episodes between gold and silver. © 2022, Emerald Publishing Limited.

Diversification during Hard Times

Using a large sample of stocks from 48 developed and emerging markets over 1995 to 2021, we find evidence that suggests that international diversification is the best risk-reduction tool when all markets are considered. However, after the turn of the millennium, industrial diversification is the best alternative for funds limited to developed markets, especially when they are restricted to a region. Importantly, the benefits of diversification persist through hard times, such as the Asian financial crisis, the IT bubble burst, the global financial crisis, and the COVID-19 pandemic, demonstrating their countercyclicality and proving their value when investors need them the most. © 2023 CFA Institute. All rights reserved.

Assessment of Argentina’s Creditworthiness After the Debt Restructuring

Argentina’s 2020 debt restructuring was the second largest sovereign restructuring in history, after Greece’s in 2012. The sovereign’s latest default was triggered by extending maturities on short-term debt in August 2019, followed by another postponement of short-term debt payments in December 2019 and long-term debt payments in February 2020. In August 2019, the government also announced its intention to restructure its long-term debt. This article compares Argentina’s sovereign debt crisis with prior sovereign bond defaults and sets forth Moody’s view that significant challenges result in Argentina’s creditworthiness remaining weak even after the debt restructuring and despite sizeable losses for investors. These challenges include Argentina’s large share of foreign-currency debt amid its dependence on external foreign-exchange financing and limited domestic funding options, and subdued economic prospects as the coronavirus pandemic deepened the country’s multi-year recession and also affected Argentina’s main trading partners. © Multinational Finance Society, a nonprofit corporation. All rights reserved.

Country Differences Call for Tailored Approaches to Debt Relief

The G-20 Debt Service Suspension Initiative (DSSI) was endorsed effective May 1, 2020, in the midst of an unprecedented fall in government revenues and rapidly rising public expenditure following the COVID-19 shock and resulting deep economic contraction. By the end of 2020, 45 of the 73 eligible countries had participated in the initiative. By March 18, 2021, 24 countries had participated in the extended DSSI. The G-20 DSSI initiative will alleviate liquidity pressures for participating countries, but in general the savings from debt relief under the DSSI are modest relative to the fiscal deterioration brought about by the COVID-19 shock. Countries eligible for the DSSI and the Common Framework for Debt Treatments differ greatly in terms of their debt-to-GDP levels, debt sustainability positions and credit risk, potential benefits from DSSI debt relief, and creditor universe. This diversity will necessitate tailored approaches to debt relief, taking into account country-specific circumstances. © Multinational Finance Society.

Credit risk interdependence in global financial markets: Evidence from three regions using multiple and partial wavelet approaches

Credit risk linkage has primarily been examined from the lens of developed country markets and using volatility index. In this paper, we investigate the interconnectedness and causality among the global financial market risks during crisis periods, using partial and multiple wavelet coherence analysis. Specifically, we employ financial sector credit default swap indices from three regions (Asia, North America, and Europe) from January 2008 to June 2021 as a proxy for risk in the financial industry. The sample period includes three global crises, namely the 2008 global financial crisis, the European debt crisis, and the current coronavirus disease of 2019 pandemic. Our findings can be summarized as follows. First, credit risks in global financial markets are highly connected across the three regions. However, if the impact of a particular region is not considered, the other two regions become less connected in terms of credit risk. Second, considerable interactions among the credit risk of financial industries in the three regions occur during crisis periods. Third, significant relationships between credit risks in Asia and North America ensue in the long-term, which is independent of the European region. Our findings provide significant implications for financial market participants, as the credit risk transmission can directly affect not only financial market stability but also portfolio risk exposure.

How could a new universal code of conduct prevent and resolve sovereign debt crises? Proposals for design and implementation

In response to the COVID-19 crisis, government spending around the world has increased significantly and will continue to grow as interest rates rise. In view of protracted and costly sovereign debt restructurings in the previous decades, contractual and noncontractual instruments of the Global Debt Governance-system have been insufficient to prevent and to resolve sovereign debt crisis. While statutory and comprehensive approaches to resolve sovereign debt crises lack the political support such as an insolvency procedure for states incomprehensive contractual approaches including collective action clauses (CACs) cannot fully secure a comprehensive debt resolution. Codes of conduct could constitute an essential instrument to contribute to preventing and resolving sovereign debt crises. There are two main impediments for establishing and adopting such codes of conduct effectively. First, a range of codes of conduct with different institutional settings and principles have been established - and partly implemented - including those of the Institute of International Finance, the United Nations, the G20, the IMF and the OECD. However, differing institutional settings do not contribute to preventing or effectively resolving debt crises when the actors concerned apply different codes of conduct. We suggest a new universal code of conduct in which the elements of the various proposals made by the public and private sectors would be combined. Second, the global economic governance structure lacks incentives for creditors and debtors to adhere to this new universal code of conduct. This paper proposes measures providing incentives for creditors and debtors to apply the nonstatutory code of conduct.

Analysis of the risk-transmitting nature of European stock indices.

This study analyses the structural changes in European stock market indices using a minimal spanning tree and a Markov-switching model that examines the regime-changes in betweenness and closeness in addition to topological changes. The authors aim is to highlight the similarities and differences of previous recessions, namely the subprime mortgage crisis of 2008, the European sovereign debt crisis of 2010, and the recent period of Covid-19. Focusing on the structural changes in the graph, the appearance of a central index transmitting shocks is sought. The results show that there is a constant change in the stock market network, where stock market indices are linked to each other mainly through a central index in turbulent periods, while relationships become more diversified in calm periods. (English) [ FROM AUTHOR] A tanulmány az európai részvénypiacok szerkezeti változásait elemzi minimális feszítőfa és Markov-féle rezsimváltó modell segítségével, amely a topológiai változások mellett a közelség és a közöttiség segítségével vizsgálja az adatokat. A szerzők célja, hogy rámutassanak a korábbi receszsziók hasonlóságaira és különbségeire, nevezetesen a 2008-as másodlagos jelzálogpiaci válságra, a 2010-es évek európai államadósság-válságára és a közelmúltban a Covid19-járvány időszakára. A szerkezeti változásokra fókuszálva egy sokkokat továbbító központi index megjelenését keresik. Folyamatos változást tapasztalnak a tőzsdei hálózatban, ahol a tőzsdeindexek a turbulens időszakokban főként egy központi indexen keresztül kapcsolódnak egymáshoz, míg a nyugodt időszakokban a kapcsolatok diverzifikáltabbá válnak. (Hungarian) [ FROM AUTHOR] Copyright of Hungarian Statistical Review / Statisztikai Szemle is the property of Hungarian Central Statistical Office and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full . (Copyright applies to all s.)

Voting for Eurosceptic Parties and Societal Polarization in the Aftermath of the European Sovereign Debt Crisis

The question of whether people voting for Eurosceptic parties in almost every European country is simply a democratic way of expressing a political opinion, or if it presents a threat to democracy by giving a voice to Eurosceptic parties that challenge the EU in a populist manner, has not lost its currency since the 2008 European sovereign dept crisis. In fact, at the first glance, the situation of anti-Corona protestors in Canada or Germany seems comparable. But contrary to some scholars, I argue that it was the economic crisis that first visualized the interdependency of the EU members to the citizens, and was, therefore, the ideal setting for populists to create an atmosphere of mistrust, with the help of the media in some countries. This Research Note addresses the undertheorized link between populism and crisis, by developing a theoretical model focussing on the aggregate level, which shows that EU-membership duration is a crucial factor in explaining voting for Eurosceptic parties. I use data from the European Social Survey and compare a period from 2002 to 2016, conducting trend analysis and difference-in-difference-estimation. My analysis reveals that Eurosceptic parties are more successful in those countries, where anti-EU protest has already been established before. In addition, I find a delayed crisis effect. This could be important for our understanding of the current Covid-19-crisis, which is a health crisis in first place, but a threat to democratic values and instrumentalized by populists as well. [ FROM AUTHOR] Copyright of Statistics, Politics & Policy is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full . (Copyright applies to all s.)

Bubble contagion effect between the main precious metals

Purpose: This study examines the extent to which gold and silver bubbles are correlated and which metal’s bubble spills over to the other. In addition, the overlap in bubble-like episodes for the two metals is demonstrated and the influence of crises (global financial crises, European debt crisis and the COVID-19 pandemic) on the development of these episodes is compared. Design/methodology/approach: This study proposes a two-step approach. In the first step, price bubbles are identified based on the backward sup augmented Dickey–Fuller of Phillips et al. (2015a, 2015b) and modified by Phillips and Shi (2018). In the second step, the correlation in the contagion effect of the bubbles between the two precious metal prices is measured using a nonparametric regression with a time-varying coefficient approach developed by Greenaway-McGrevy and Phillips (2016). Findings: The findings suggest that the safe-haven property of gold and silver during financial market turbulence induces excessive price increases beyond their fundamental values. Furthermore, the results indicate that bubbles are contagious among precious metal markets and flow mainly from gold to silver;these findings are associated with the period after 2005, particularly during the global financial crisis. A contagious bubble effect is not found between gold and silver during the coronavirus disease 2020 pandemic. Practical implications: The results suggest that financial market participants should consider portfolio weights in precious markets in light of the bubble correlation between gold and silver, especially during crises. Originality/value: To the best of the authors’ knowledge, this is the first study that explores the correlation of bubble-like episodes between gold and silver. © 2022, Emerald Publishing Limited.

Does oil impact gold during COVID-19 and three other recent crises?

The ongoing COVID-19 pandemic has inspired an examination of the oil-gold prices nexus during four recent crises: the COVID-19 pandemic, the gold market crash, the European sovereign debt crisis, and the global financial crisis. Using daily data from May 2007-August 2021, we employ the nonlinear autoregressive distributed lag method to reveal five novel findings. First, this study contrasts with much of the literature, which infers that the relationship between oil and gold prices is strongly positive. Second, we find no oil and gold price relationship in the long term during all the crisis periods. Third, oil prices have substantially lost their power to predict gold prices in recent times and the oil-gold price linkage is not functional across all crisis periods. Fourth, in the short term, only negative Brent and negative West Texas Intermediate price changes cause positive gold price changes during the pandemic and gold market crash, respectively. Fifth, Brent prices have shown no link to gold prices before COVID-19. We argue that gold prices are less sensitive to oil prices than ever, and the uncertainty resulting from the COVID-19 crisis has attracted investors to gold. Our main findings hold under robustness analyses using fractional cointegration/integration models, lag length, and heteroskedasticity-consistent standard errors.

Sri Lanka in 2021: Vistas on the Brink

The Rajapaksa government consolidated its position with new laws, special task forces, and public-sector appointments. With the opposition wiped out, Sri Lanka now has a unipolar political landscape. Two successive waves of COVID-19 infections caused a rising death toll and necessitated severe lockdowns. The resulting economic problems exposed structural weaknesses in Sri Lanka’s macroeconomic constellation, with depleting foreign exchange and an acute debt burden. These interlocking crises triggered new forms of protest and a new convergence of previously disparate societal opposition.

Modelling the quantile cross-coherence between exchange rates: Does the COVID-19 pandemic change the interlinkage structure?

This paper examined the presence of daily returns coherence and spillover between 30 forex markets over the complete sample and crisis sub-periods. We mainly employed the quantile cross-spectral approach of Barunik and Kley (2019) to measure returns coherence among different investment horizons, while returns spillover is examined using the network connectedness approach. During the COVID-19 period, we found evidence supporting the interdependence hypothesis as opposed to the segregation model. This turns out to be significantly more accurate in the long-run horizon period under the 95%;95% return arrangement. In contrast, the global financial crisis is found to bring more diversification benefits for investors under the same arrangement. Furthermore, the results from ESDC-based analysis revealed some similarities with that from COVID-19 due to the absence of clearly significant negative interlinkages between the pairs in the sample. Lastly, the additional network connectedness analysis made the European (Belgian franc) FX market the primary receiver of shocks during the period of COVID-19 (European and financial). Our results carry significant implications for investors and policymakers concerning timely portfolio rebalancing and performing more organized monetary policies, respectively.

The static and dynamic connectedness of environmental, social, and governance investments: International evidence.

We investigate the connectedness of the most significant global equity indices that comprise companies with the highest environmental, social, and governance (ESG) performance. Motivated by the rapid growth of socially responsible investing during the last two decades, we examine whether these investments are prone to similar exogenous economic and financial shocks as their conventional counterparts. Employing a variety of influential macroeconomic and financial variables over the period 10/1/2007-4/15/2020, we document statistically significant and consistent transmissions between the employed equity indices throughout the sample period. In particular, the connectedness exhibits dynamic patterns during three periods: the European sovereign debt crisis, the systemic Greek problems, and the outbreak of the coronavirus pandemic. We also find that developed equity markets are the shock transmitters to Asian and other emerging markets. Our results highlight the risk of contagion and the diminishing portfolio diversification benefits of these equity indices during turbulent periods.