Do international institutions affect financial markets?: evidence from the Greek Sovereign Debt Crisis

摘要

This paper investigates the effects of the policy announcements from the International Monetary Fund, and European Union (EU) offices including the European Commission, the European Central Bank, the Euro Area ministers on financial and real sectors during the recent Greek Sovereign Debt Crisis. We also include the reactions of financial and real sectors to Rating Agencies, Greek government and Greek public that were actively involved. We find that financial sectors have stronger reactions to international institutions and Greek government policy action announcements than the real sectors. Banking and financial sectors react predominantly negatively to unfavorable announcements, while real sector responses are mixed. The immediate reaction to EU offices and troika policy announcements are the highest in banking with negative abnormal returns of more than 1.5% per day. Public riots following unfavorable EU announcements also generate high falls in banking and financial sectors. The results show that favorable effects of an announcement from an international organization can be offset by negative effects arising from protests from the public and negative responses of the local government to announcements from international organizations.