Draghi Effect

AAA

DEFINITION of 'Draghi Effect'

The calming effect of European Central Bank President, Mario Draghi, on global financial markets. When the Draghi effect is at play, yields on bonds of embattled European nations, such as Greece and Spain, recede from historic high levels, reducing their cost of borrowing and indicating that there is buyer demand for their sovereign bonds. The euro also tends to rise under the Draghi effect, while risk appetite returns and equity markets rally. In short, the Draghi effect causes the European sovereign debt crisis to look less gloomy and the global macroeconomic more positive.

INVESTOPEDIA EXPLAINS 'Draghi Effect'

The Draghi effect is made possible by the enormous credibility that Mario Draghi possesses in global financial markets. Mario Draghi assumed the office of President of the ECB in November 2011, after 15 years in academia as a Professor of Economics and two decades in the public and private sector, with institutions such as the World Bank, the Italian Treasury, Goldman Sachs and the Bank for International Settlements. This combination of academic and professional experience gives Draghi a level of credibility in financial markets that is perhaps only matched by that accorded to Federal Reserve chairman, Ben Bernanke.

RELATED TERMS
  1. European Sovereign Debt Crisis

    A period of time in which several European countries faced the ...
  2. European Union - EU

    A group of European countries that participates in the world ...
  3. Euro

    The official currency of the European Union's (EU) member states. ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European ...
  5. Ben Bernanke

    The chairman of the board of governors of the U.S. Federal Reserve. ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or ...
Related Articles
  1. Behind The Euro: History And Future
    Forex Education

    Behind The Euro: History And Future

  2. An Introduction To The PIIGS
    Economics

    An Introduction To The PIIGS

  3. 5 Economic Reports That Affect The Euro
    Forex Education

    5 Economic Reports That Affect The Euro

  4. How U.S. Firms Benefit When The Dollar ...
    Options & Futures

    How U.S. Firms Benefit When The Dollar ...

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center