Eurozone Network Connectedness During Calm and Crisis: Evidence from the MTS Platform for Interdealer Trading of European Sovereign Debt

This paper examines the connectedness of the Eurozone sovereign debt market over the period 2005–2011. By employing measures built from the variance decompositions of approximating models we are able to define weighted, directed networks that enable a deeper understanding of the relationships between the Eurozone countries. We find that connectedness in the Eurozone was very high during the calm market conditions preceding the global financial crisis but decreased dramatically when the crisis took hold, and worsened as the Eurozone sovereign debt crisis emerged. The drop in connectedness was especially prevalent in the case of the peripheral countries with some of the most peripheral countries deteriorating into isolation. Our results have implications for both market participants and regulators.

Law, Politics and Financial Development: The Great Reversal of the U.K. Corporate Debt Market

This article examines the role of creditor protection in the development of the U.K. corporate bond market. This market grew rapidly in the late nineteenth century, but in the twentieth century it experienced a reversal, albeit with a short-lived post-1945 renaissance. Such was the extent of the reversal that the market from the 1970s onwards was smaller than it had been in 1870. We find that law does not explain the variation in the size of this market over time. Alternatively, our evidence suggests that inflation and taxation policies were major drivers of this market in the post-1945 era. Copyright © The Economic History Association 2013

Benchmark Status in Fixed-Income Asset Markets

What is a benchmark bond? We provide a formal theoretical treatment of this concept that relates endogenously determined benchmark status to the location of price discovery and we derive its implications. We describe a rich but little used econometric technique for identifying the benchmark that is congruent with our theoretical framework. We apply this in the context of the US corporate bond market and to the natural experiment that occurred when benchmark status was contested in the European sovereign bond markets after the introduction of the Euro. We show that France provides the benchmark at most maturities in the Euro-denominated sovereign bond market and that IBM provides the benchmark in the 10 year maturity in the US corporate bond market.

How the ship of fools was ship-wrecked - The Irish crisis and response

For a decade and half the Irish economy was the poster-boy of Europe. With substantial growth rates, an open economy, flexible labour markets and low levels of taxation, Ireland was seen as evidence of the success of neoliberal policies. Yet in the matter of a few short years Ireland has turned into a one of the peripheral black-holes (along with Greece and Portugal) that are threatening to bring down the whole Eurozone project. Given this context the paper will address two key questions. Firstly how did the much eulogised Celtic Tiger fall so far and so fast? And, secondly, what has been the government’s response to the fall and crash of the Irish economy? These two questions will be addressed through both a general historical analysis of the developments of Irish society up to the crash in 2008 and then the responses to it. Secondly by an analysis of two specific elements of that development; namely the much discussed low corporation tax rate and the failure of social housing to deliver decent affordable homes for those at the bottom of society. The third element is a review of the banking and sovereign debt crisis that led to the IMF/EU deal in November 2010 and a brief outlining of its implications for public finances, especially the question of default. The paper concludes by placing the Irish crisis in a global context.

Cultures of Rioting and Anti-Systemic Politics in Southern Europe

The article investigates why, despite similar background conditions, Greece has been the site of frequent, highly visible, fringe, anti-system politics and street riots, while similar phenomena are rare in Spain. Although the article's focal point is the eruption of the December 2008 riots in Athens, it sheds light on the two countries' diverse social reactions to the sovereign debt crisis. Deploying the tool of media framing, it argues that historical legacies and political cultures matter. In the Greek case, the transition to democracy shaped a political ‘culture of sympathy’ towards acts of resistance to the state, a culture that has been institutionalised since the mid-1970s.

Transparency Proposals for European Sovereign Bond Markets

The debate over the possible extension of transparency regulation in Europe to include sovereign bonds has opened up a number of other issues in need of serious consideration. One such issue is the appropriateness of the entire infrastructure supporting the trading of European sovereign bonds. In recent years sovereign issuers have supported the development of an electronic inter-dealer market but have remained unconcerned with the opacity of dealer-to-customer trading. The degree of segmentation in this market is high relative to what exists in nearly all other financial markets. This paper explores why European sovereign bond markets have developed in such a segmented way and considers how this structure could be altered to improve transparency without adversely affecting liquidity, efficiency or the benefits enjoyed by primary dealers and issuers. It is suggested that the structure of the market could be improved greatly if the largest and most active investors were permitted access to the inter-dealer electronic trading platforms. This would solve a number of market imperfections and increase the proportion of market activity that is conducted in a transparent way. The paper argues that sovereign issuers in Europe have the means to provide incentives that would influence dealers to support reduced segmentation. Some practical examples of how this could be achieved are provided and the potential benefits are outlined.

Credit and community: working class debt in the UK since 1880

This book examines credit in working class communities since 1880, focusing on forms of borrowing that were dependent on personal relationships and social networks. It provides an extended historical discussion of credit unions, legal and illegal moneylenders (loan sharks), and looks at the concept of ‘financial exclusion’. Initially, the book focuses on the history of tallymen, check traders, and their eventual movement into moneylending following the loss of their more affluent customers, due to increased spending power and an increasingly liberalized credit market. They also faced growing competition from mail order companies operating through networks of female agents, whose success owed much to the reciprocal cultural and economic conventions that lay at the heart of traditional working class credit relationships. Discussion of these forms of credit is related to theoretical debates about cultural aspects of credit exchange that ensured the continuing success of such forms of lending, despite persistent controversies about their use. The book contrasts commercial forms of credit with formal and informal co-operative alternatives, such as the mutuality clubs operated by co-operative retailers and credit unions. It charts the impact of post-war immigration upon credit patterns, particularly in relation to the migrant (Irish and Caribbean) origins of many credit unions and explains the relative lack of success of the credit union movement. The book contributes to anti-debt debates by exploring the historical difficulties of developing legislation in relation to the millions of borrowers who have patronized what has come to be termed the sub-prime sector.

Experiences with mephedrone pre- and post-legislative controls: Perceptions of safety and sources of supply

Background: Drug scenes within several countries have changed in recent years to incorporate a range of licit psychoactive products, collectively known as “legal highs.” Hundreds of different legal high products have been described in the literature. Many of these products contain synthetic stimulants that allegedly
“mirror” the effects of some illicit drugs. In 2009–2010, growing concern by the UK and Irish governments focused on mephedrone, a synthetic stimulant that had become embedded within several drug scenes in Britain and Ireland. In April 2010, mephedrone and related cathinone derivatives were banned under
the UK’s Misuse of Drugs Act 1971. Setting aside “worse case scenarios” that have been portrayed by UK and Irish media, little is known about mephedrone use from the consumer’s perspective. The purpose of this paper was to (1) explore respondents’ experiences with mephedrone, (2) examine users’ perceptions
about the safety of mephedrone, and primarily to (3) examine sources of mephedrone supply during the pre- and post-ban periods.
Methods: Semi-structured interviews were conducted with 23 adults who had used mephedrone during 2009–2010. Data collection occurred in May and June 2010, following the ban on mephedrone. A total of 20/23 respondents had used mephedrone during the post-ban period, and the vast majority had prior
experience with ecstasy or cocaine. Respondents’ ages ranged from 19 to 51, approximately half of the sample were female and the majority (19 of 23) were employed in full- or part-time work.
Results: Most respondents reported positive experiences with mephedrone, and for some, the substance emerged as a drug of choice. None of the respondents reported that the once-legal status of mephedrone implied that it was safe to use. Very few respondents reported purchasing mephedrone from street-based
or on-line headshops during the pre-ban period, and these decisions were guided in part by respondents’ attempts to avoid “drug user” identities. Most respondents purchased or obtained mephedrone from friends or dealers, and mephedrone was widely available during the 10-week period following the ban. Respondents reported a greater reliance on dealers and a change in mephedrone packaging following the criminalisation of mephedrone.
Conclusion: The findings are discussed in the context of what appears to be a rapidly changing mephedrone market. We discuss the possible implications of criminalising mephedrone, including the potential displacement effects and the development of an illicit market.

The Economics of Total War and Reconstruction, 1914-1922

This chapter features a discussion of the economy and mobilization for the First World War. The authors analyse the implications and cost of total war, concluding with an examination of its contradictory legacies. In studying the war’s impact on Germany in particular, the chapter provides an in-depth look at the consequences of war on Europe’s strongest pre-war economy, without the complications of separating out the issues of a developing country, which can mimic those faced in wartime. The economic challenges that warring parties faced during the war included mobilization, warfare, labour shortage, impaired domestic economic activity, restricted international trade, a systematic redistribution of resources towards the war economy, food rationing, the predictable emergence of black markets, and a drop in living standards. The authors also discuss strategies to meet the significant financial demands associated with the war, and its tumultuous economic and political aftermath.

Price Discovery in the Dual-Platform US Treasury Market

Inter-dealer trading in US Treasury securities is almost equally divided between two electronic trading platforms that have only slight differences in terms of their relative liquidity and transparency. BrokerTec is more active in the trading of 2-, 5-, and 10-year T-notes while eSpeed has more active trading in the 30-year bond. Over the period studied, eSpeed provides a more pre-trade transparent platform than BrokerTec. We examine the contribution to ‘price discovery’ of activity in the two platforms using high frequency data. We find that price discovery does not derive equally from the two platforms and that the shares vary across term to maturity. This can be traced to differential trading activities and transparency of the two platforms.