This paper analyses the determinants and effects of ECB interventions in times of severe distress. We focus on the Greek government bond market in mid-2010 and use a unique new dataset to show, for the first time, what type of bonds the ECB bought. We then explore the short-term effects of ECB...

We assess the role of financial linkages for the transmission of sovereign risk in the Euro Crisis. Building on the narrative approach by Romer and Romer (1989), we use financial news to identify structural shocks in a VAR model of daily sovereign CDS for eleven European countries. To estimate...

Sovereign debt restructurings are perceived as inflicting large losses to bondholders. However, many bonds feature high coupons and often exhibit strong post-crisis recoveries. To account for these aspects, we analyze the long-term returns of sovereign bonds during 32 crises since 1998, taking...

We examine the welfare effects of bailouts in economies exposed to sovereign default risk. When a government of a small open economy requests a bailout from an international financial institution, it receives a non-defaultable loan of size G that comes with imposed debt limits. The government...

This paper examines the role of sovereign default beliefs for macroeconomic fluctuations and stabilisation policy in a small open economy where fiscal solvency is a critical problem. We set up and estimate a DSGE model on Turkish data and show that accounting for sovereign risk significantly...