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Determinants of government bond spreads in the euro area: in good times as in bad
- Source :
- Empirica. 39:341-356
- Publication Year :
- 2011
- Publisher :
- Springer Science and Business Media LLC, 2011.
-
Abstract
- Government bond spreads increased rapidly during the financial turmoil in the euro area. In general, government bond spreads in the euro area are attributed to solvency and liquidity risks and determinants thereof. This paper proposes the use of latent processes to model the time variation present in the evaluation of these determinants. In contrast to approaches using global measures like the US corporate bond spreads or short-term interest rates to approximate time variation, our model is also flexible enough to deal with the unfolding of the financial crisis. The findings suggest that the expected debt-to-GDP ratio explains a major part of the differences in bond yields in the euro area between 2003 and the unfolding of the financial crises. Coefficients for many determinants increased rapidly during the financial crises. Especially market capitalization gained relative importance in winter 2008/2009.
- Subjects :
- default risk
Zinsstruktur
Financial economics
media_common.quotation_subject
Geography, Planning and Development
liquidity risk
Monetary economics
Development
Kreditrisiko
Euro Area
Risikoprämie
ddc:330
Economics
G12
Deutschland
C32
media_common
bond spreads
Bond
Liquidity risk
Öffentliche Anleihe
Interest rate
Market liquidity
time-varying coefficients
Corporate bond
Financial crisis
Government bond
EU-Staaten
E62
E43
C23
Public finance
Subjects
Details
- ISSN :
- 15736911 and 03408744
- Volume :
- 39
- Database :
- OpenAIRE
- Journal :
- Empirica
- Accession number :
- edsair.doi.dedup.....7e41f69d195ed4726a5a6a98922b786b