01973cas a2200253 a 4500 AALejournalIMF006091 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451873696 1018-5941 BD-DhAAL BD-DhAAL Zoli, Edda. Euro Area Sovereign Risk During the Crisis / Edda Zoli, Silvia Sgherri. Washington, D.C. : International Monetary Fund, 2009. 1 online resource (23 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students While the use of public resources is critical to cushion the impact of the financial crisis on the euro-area economy, it is key that the entailed fiscal costs not be seen by markets as undermining fiscal sustainability. From this perspective, to what extent do movements in euro area sovereign spreads reflect country-specific solvency concerns? In line with previous studies, the paper suggests that euro area sovereign risk premium differentials tend to comove over time and are mainly driven by a common time-varying factor, mimicking global risk repricing. Since October 2008, however, there is evidence that markets have become progressively more concerned about the potential fiscal implications of national financial sectors' frailty and future debt dynamics. The liquidity of sovereign bond markets still seems to play a significant (albeit fairly limited) role in explaining changes in euro area spreads. Mode of access: Internet Sgherri, Silvia. IMF Working Papers; Working Paper ; No. 2009/222 Full text available on IMF http://elibrary.imf.org/view/journals/001/2009/222/001.2009.issue-222-en.xml IMF e-Library