Ricerc@Sapienza

Since the 2011-12 sovereign debt crisis many euro-area countries have experienced economic slowdown and deflation, in a period with large government debt overhang. This scenario creates the conditions for financial market distress, with sovereign spreads surges and large fluctuations in agents' expectations. This article investigates the historical determinants of Italian sovereign risk, using a Markov-switching VAR on 1990-2018 data. It aims to identify the triggers of sovereign crises and study fundamental versus regime-dependent sentiment drivers.

This paper analyzes the changes over time of the intra-EU competitiveness shock absorption in Italy, checking whether structural changes occurred under different Exchange Rate Mechanisms and with the crisis. By using a time-varying Bayesian VAR identified with mixed sign and zero restrictions, we find that the share of a competitiveness shock absorbed through the trade balance in Italy, has permanently increased with the EMU.