The Greek sovereign debt crisis as an important chapter in the history of the European Monetary Union: empirical evidence and some thoughts on implications for investors and financial risk managers

Abstract

After the burst of the US real estate price bubble in 2008, the events in Greece played, at least for some time, a unique role on the path towards the European sovereign debt crisis. We examine this issue empirically and then discuss some relevant questions for policymakers, regulators, fixed income investors, and financial risk managers. Our findings should be of interest when modeling risk premia determined in the market for sovereign bonds issued by countries that have introduced the Euro. Given the exposure of the European insurance industry to these fixed-income securities, the results are important for asset managers and financial risk managers that are working in this segment of the financial services industry.