Browsing by Author "Santos, Carlos"
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- Assessing French inflation persistence with impulse saturation break tests and automatic general-to-specific modellingPublication . Santos, Carlos; Oliveira, Maria Alberta
- Assessing school efficiency in Portugal using FDH and bootstrappingPublication . Alberta Oliveira *, Maria; Santos, Carlos
- Automatic selection of indicators in a fully saturated regressionPublication . Hendry, David F.; Johansen, Søren; Santos, Carlos
- Determinants of credit default swaps implied ratings during the crisis: was sovereign risk mispriced?Publication . Alberta Oliveira, Maria; Santos, CarlosThis paper addresses the question of whether sovereign risk pricing was related to macroeconomic fundamentals, between 2007 and 2015, in a sample of OECD countries. The authors argue that the conflicting evidence in the literature is due to poor methodology options. The researchers innovate by modelling sovereign credit default swaps implied ratings as our sovereign risk proxy, instead of spreads, avoiding common pitfalls. Furthermore, the authors improve the variable selection, model specification and the econometric procedures used. A panel ordered probit model is chosen, assuring robust inference. The authors relax the parallel lines assumption, allowing for rating-varying coefficients of explanatory variables. The result is the first congruent model of sovereign risk during the years of the financial crisis and of the Euro Area crisis. Fiscal space variables, economic activity indicators, variables pertaining to external imbalances, and contagion proxies are relevant, with effects matching theory priors. The scientists clarify conundrums in the previous literature, posed by lack of significance of some macro fundamentals and by puzzling signs of some estimated coefficients. Moreover, this is the first paper to estimate not only the global risk premium, but also the impact of changing risk aversion. The authors find no support for claims of sovereign risk mispricing during the sample period. The results allow relevant policy conclusions, namely concerning the validity of different fiscal consolidation paths in financially distressed countries.
- Impulse saturation break testsPublication . Santos, Carlos
- Looking for a change point in French monetary policy in the early eightiesPublication . Oliveira, Maria Alberta; Santos, Carlos
- Market exuberance in sovereign credit default swaps: assessing the EU regulatory framework and trading profit opportunitiesPublication . Oliveira, Maria Alberta; Santos, CarlosSovereign credit default swaps (SCDSs) have been at the core of the Euro Area (EA) debt crisis, particularly in its periphery. Both EU politicians and a wide range of EU academics have asked for tighter regulation of these over-thecounter (OTC) derivatives, following similar pressures to the ones that had resulted from the 2008 financial crisis for corporate reference entities. As such, the SCDSs regulatory framework experienced a number of changes from 2009 to 2014, in the EU. This paper provides a seminal assessment on whether these new rules have succeeded in preventing SCDSs exuberance episodes in the EU. Using daily data for 5 years maturity Greek SCDSs, comprising the period between the latest regulatory reform, in September 2014, and mid-March 2015, we find clear evidence of explosive behavior in SCDSs spreads, and even in upfront quotes. The authors take advantage of the new Phillips et al. (2015a, 2015b) test for multiple exuberance episodes, which had rarely been used in derivatives markets, and conduct an event study to conclude that Greek elections, in early 2015, and the associated turmoil has led to a surge in momentum trading, with significant potential returns for SCDSs buyers. The regulatory measures aiming at deleveraging these markets, standardizing contracts, and dissociating sovereign and banking risk, do not seem to have achieved their purposes, as the political and financial anxiety in Greece, starting in December 2014, has led to explosive behaviour episodes in the market for Greek SCDSs, of the type regulators had tried to avoid.
- Modelling the German Yield Curve and Testing the Lucas CritiquePublication . Santos, Carlos; Oliveira, Maria Alberta
- Regression Models with Data-based Indicator Variables*Publication . Hendry, David F.; Santos, Carlos