The Dynamics of Greek and German Long-Term Sovereign Bond Yields - A Portfolio BalanceApproach.

The sovereign debt crisis in Greece began in 2009, while the country was also suffering from the adverse consequences of the global financial crisis and profoundly impacted the Greek economic and political situation for years to come. Triggered by a combination of economic imbalances, which remained unaddressed for decades prior to the crisis and by the policy decisions of previous governments, the sovereign debt crisis triggered a “flight-to-quality” reaction significantly increasing the yield spread between Greek and German sovereign bonds. This article will take a closer look at the sovereign yield spreads between Greece and Germany during and since the crisis using a portfolio balance model.

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