Gevorkyan, Arkady

Expected competion: Spring 2014.

Curriculum Vitae (PDF)

Dissertation title: 
Macroeconomic variables and the sovereign risk premia in European economies

Dissertation advisor:
Willi Semmler

Dissertation abstract
This project studies and models key macroeconomic variables and their impact on sovereign risk premia across 12 European economies. The country sample is divided in two groups represented by countries that are part of the European Monetary Union and stand alone economies. The main subject of examination across both groups is the impact of macroeconomic variables on sovereign borrowing costs. Some of the relevant indicators are private and public over-leveraging, vulnerability of the banking system, current account deficits, debt held by foreigners. Another dimension to this analysis is the study of the interaction of the private and public borrowing costs in different countries. Much of the analysis relies on careful examination of a five-year CDS spread as a leading forward indicator in sovereign finance. The Non-linear Model Predictive Control (NMPC) method is used to mathematically solve different variants of the dynamic macro model. The NMPC method allows determining the dynamic paths of macro variables and sovereign borrowing costs for each country group. Finally, GARCH modeling is applied to show interrelations of the volatilities of the five-year sovereign CDS for each country group.


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