We document a “flash” crash in the Italian debt market on May 29, 2018 which recovered in the subsequent two days. Selling pressure in the secondary mar- ket due to a change of the Italian political scenario was not absorbed properly and caused overreaction. Using a regime-switching model, we estimate a direct cost for Italian taxpayers around 450 million euros just in that week, due to auctions that were taking place on May 30, plus several long-term indirect costs in terms of increased volatility and harsher liquidity in the following months. Flash crashes represent thus a serious threat to financial stability even in systemic, economically central markets like sovereign debt.
Titolo: | The Italian debt not-so-flash crash | |
Autori: | ||
Data di pubblicazione: | 2021 | |
Handle: | http://hdl.handle.net/11562/1053452 | |
Appare nelle tipologie: | 04.01 Contributo in atti di convegno |