Government risk premiums in the bond market: EMU and Canada |
| |
Authors: | Ludger Schuknecht, Jü rgen von Hagen,Guido Wolswijk |
| |
Affiliation: | aEuropean Central Bank, Directorate General Economics, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany;bDepartment of Economics, University of Bonn, Lennéstrasse 37, 53113 Bonn, Germany |
| |
Abstract: | This paper focuses on risk premiums paid by central governments in Europe and sub-national governments in Germany, Spain, and Canada, using data for bond yield spreads for the period 1991–2005. We find that risk premiums by central governments respond positively to debt and deficits; German states enjoyed a favourable position in financial markets before EMU but not thereafter; Spanish and Canadian provinces risk premiums over the whole period; German and Spanish sub-central governments pay liquidity-related interest rate premiums; Canadian and German provinces/states that benefit from fiscal equalization lower spreads. This is evidence of market discipline at work and of credibility of the EU no-bailout clause. |
| |
Keywords: | Interest rates Fiscal policy Government debt Bail out Regional public finances |
本文献已被 ScienceDirect 等数据库收录! |
|