Sovereign Risk and Financial Crisis

Dr Silvia Pepino is Senior Adviser at the Bank of England, UK. Previously, she worked at JPMorgan and at leading global macro funds. She has frequently been quoted in the international media. She holds a PhD from the London School of Economics and Political Science, the TRIUM MBA degree from New York University-Stern, HEC Paris and the LSE, and an MSc from Bocconi University in Milan.

"Silvia Pepino's arguments are highly appreciable and well-researched. The methodologies that she employs and the empirical evidences that she presents qualify the work to claim an inimitable status." - Rajeesh Kumar, Jawaharlal Nehru University, India "Sovereign debt crises are relatively rare events, particularly among advanced democracies. In this careful and original study of the pivotal Eurozone crisis, Silvia Pepino shows in detail how domestic and international political factors shape market perceptions of sovereign risk. This book should be read by all those interested in how markets and politics interrelate." - Andrew Walter, University of Melbourne, Australia "This is an important, as well as obviously timely, advance in our understanding of investor perceptions of sovereign credit risk in general and the Euro area crisis in particular. By demonstrating that the focus of investment analysis can change over time, and broaden as default becomes a possibility, Pepino contributes to a necessary move beyond the developed / emerging market dichotomy." - Iain Hardie, University of Edinburgh, UK "The North-Atlantic financial crisis of 2007-8 has thrown up new research questions. One such question is how high-income countries within a hard currency area could become the target of speculative financial attacks typical of emerging markets. This book makes a timely and well-researched contribution to answering this question. It provides evidence that political news played more of a role in these attacks than received wisdom has it." - Waltrauld Schelkle, London School of Economics and Political Science, UK

• PART I: SOVEREIGN RISK, POLITICS AND THE EUROZONE CRISISi. Introduction1. Sovereign Risk, Developed Democracies and Financial Crisis2. Sovereign Risk and the Debt Crisis in the Eurozone3. The Focus of the Book4. The Approach in the Book5. Outline of the BookPART II: BOND SPREADS, EMU DESIGN AND THE RUN-UP TO THE CRISIS1. Introduction2. Adaptive Markets and Sovereign Risk Models3. The Political Sources of Sovereign Credibility in Financial Markets4. International Influences on Sovereign Risk Perceptions5. Theoretical PillarsPART III: BOND SPREADS, EMU DESIGN AND THE RUN-UP TO THE CRISISi. Introduction1. Government Bond Spreads and EMU Design2. Greece and Ireland: The Macro and Political Economy3. Politics and Spreads Before 2008PART IV: THE GREEK SOVEREIGN DEBT CRISIS1. Introduction2. Evolving Investment Analysis and the Greek Sovereign Debt Crisis3. Domestic Political Economy of the Greek Sovereign Debt Crisis4. International Political Economy of the Greek Sovereign Debt Crisis5. Key results from the Greek Case StudyPART V: THE IRISH SOVEREIGN DEBT CRISIS1. Introduction2. Evolving Investment Analysis and the Irish Sovereign Debt Crisis3. Domestic Political Economy of the Irish Sovereign Debt Crisis4. International Political Economy of the Irish Sovereign Debt Crisis5. Key results from the Irish Case StudyPART VI: THE IPE OF THE EUROZONE SOVEREIGN DEBT CRISIS1. Introduction2. Lessons from the Greek and Irish Cases3. Application to other Eurozone Sovereigns4. Next Steps in IPE Research5. Implications for Policy6. Final Remarks