Skip to main content
Article thumbnail
Location of Repository

The Greek financial crisis: growing imbalances and sovereign spreads

By Stephen G. Hall, George S. Tavlas and Heather D. Gibson


We discuss the origins of the Greek financial crisis as manifested in the growing fiscal and current-account deficits since euro-area entry in 2001. We then provide an investigation of spreads on Greek relative to German long-term government debt. Using monthly data over the period 2000 to 2010, we estimate a cointegrating relationship between spreads and their long-term fundamental determinants, and compare the spreads predicted by this estimated relationship with actual spreads. We find periods of both undershooting and overshooting of spreads compared to what is predicted by the economic fundamentals

Topics: Greek financial crisis, sovereign spreads
Publisher: Dept. of Economics, University of Leicester
Year: 2011
OAI identifier:

Suggested articles


  1. (2010). An analysis of euro area sovereign CDS doi
  2. (2003). An indicator measuring underlying economic activity in Greece, Bank of Greece Working Papers,
  3. (2010). Banking and sovereign risk in the euro area”, Deutsche Bundesbank,
  4. (1991). Cointegration in recursive systems”, doi
  5. (1981). Debt with potential repudiation: theoretical and empirical analysis”, doi
  6. (1998). Determinants of emerging market bond spread: do economic fundamentals matter?”, Policy Research Working Paper, World Bank, doi
  7. (2007). Economics of Monetary Union, 7th edition, doi
  8. (2003). Empirical determinants of emerging market economies’ sovereign bond spreads”, Bank of England Working Paper, doi
  9. (1997). High yields: the spread on German interest rates”, doi
  10. (1995). Identifying restrictions of Linear Equations with Applications to simultaneous Equations and Cointegration”, doi
  11. (2009). Interview with Governor George Provopoulos”, Kathimerini (Greek edition),
  12. (2002). Long run structural modelling”, doi
  13. (1991). Optimal inference in cointegrated systems”, doi
  14. (1988). Statistical analysis of cointegration vectors”, doi
  15. (1998). Structural analysis of cointegrating VARs”, doi
  16. (2007). The determinants of sovereign bond spreads: theory and facts from doi
  17. (1995). The economics of VAR models. doi
  18. (2009). What can EMU countries’ sovereign bond spreads tell us about market perceptions of default probabilities during the recent financial crisis?”, doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.