The Impact of Political Communication on Sovereign Bond Yields in the Euro Area during the Crisis
Marion Salines, European Central Bank
(Joint paper with Gabriel Glöckler & Thomas Gade)
While the causes of the sovereign debt crisis in the euro area lay primarily in the economic realm, inconsistent political communication from EU policy-makers may have exacerbated it. The lack of verbal discipline created negative feedback loops between markets and policy actions on several occasions. This paper aims to (i) outline the specificities and institutional aspects of political communication in Europe, (ii) investigate whether a statistical link between various forms of political communication and sovereign debt yields can be established, and if so, quantify the impact, (iii) explore possible contagion effects across euro area Member States, and (iv) draw policy lessons.