Research On Origins Of Euro Area Sovereign Debt Crisis Based On The Perspective Of Technical Efficiency

In2013, the economies of the euro area member states continued their downturn. Spain, Greece were plagued by the debt crisis while Germany and France were facing their economies deteriorated. Such a situation was caused by the sovereign debt crisis erupted in2009. Soon after the credit rating agencies downgrading Greece’s sovereign credit rating, Greece lost the ability to raise funds in financial markets. This crisis was so severe that it was not recovered even today. This paper attempts to discover the reasons why this crisis was so difficult to cure, what will the Euro faces in the future and what China could learn from this crisis. And this research will also provide enlightenment for us to promote regional financial cooperation in East Asia and RMB’s internationalization.In the section of Literature Review, this paper introduces the causes of the crisis from multiple angles. Then it makes a detailed introduction to the development and application of technical efficiency. It also explains several common measurements of technical efficiency.In the section of Theoretical Analysis, the framework, significance and model of technical efficiency are also stated. Then it describes the relationship between technical efficiency and debt-to-GDP ratio and makes clear the pathway how such a mechanism works.In the section of Empirical Analysis, the technical efficiency of the member states are calculated with SFA method. Then a model is set to explain how the technical efficiency could influence the debt-to-GDP ratio. A concrete analysis will be made to explain these relationships for each country.At last, this paper will get its conclusion as well as several suggestions. Firstly, the relationship between technical efficiency and debt-to-GDP ratio is not a simple linear one. In different stage, the former will have different effect to the latter. As a result, different levels of sovereign debt risk could be created accordingly. The country that has a low technical efficiency rate and a slow increase would probably fall into a crisis when there is a exogenous shock. Then this paper attempts to give some suggestion on promoting regional financial cooperation in East Asia and the RMB’s internationalization from the perspective of technical efficiency.