Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 3 (2015), No. 4, Pages 11-37

DOI: 10.12735/jfe.v3i4p11

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The Impact of Political Events Related to European Fiscal Governance on the Volatility of a Time-Varying Risk Premium in Euro Foreign Exchange Markets: The Early Years of European Fiscal Governance

Christian Fahrholz1 

1School of Economics and Business Administration, Friedrich-Schiller-University Jena, Jena, Germany

URL: https://doi.org/10.12735/jfe.v3i4p11

To Cite this Article     Article Views: 695     Downloads: 381  Since deposited on 2015-12-16

Abstract

This article examines whether and to what extent non-scheduled and scheduled political events concerning the European fiscal governance have influenced the volatility of the euro risk premium. In particular, this study estimates how political behavior by the European Commission, the Economic and Financial Affairs Council, and the European Council has impacted the volatility of a time-varying risk premium of the euro vis-à-vis the US dollar and the Swiss franc. Analyzing daily data, the empirical results point to crucial shortcomings of the legal framework of European fiscal governance, which are detectable even in this legal framework’s early years.

JEL Classifications: G15, F31, E62, C32

Keywords: uncovered interest rate parity, risk premium, political event data

To Cite this Article: Fahrholz, C. (2015). The impact of political events related to European fiscal governance on the volatility of a time-varying risk premium in euro foreign exchange markets: The early years of European fiscal governance. Journal of Finance and Economics, 3(4), 11-37. https://doi.org/10.12735/jfe.v3i4p11

Copyright © Christian Fahrholz

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This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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The Impact of Political Events Related to European Fiscal Governance on the Volatility of a Time-Varying Risk Premium in Euro Foreign Exchange Markets: The Early Years of European Fiscal Governance
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