Recovering from bond market distress: Good luck and good policy |
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Authors: | Sébastien Wälti Ghislaine Weder |
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Institution: | 1. Swiss National Bank, Börsenstrasse 15, 8022 Zürich, Switzerland;2. Graduate Institute of International and Development Studies, Avenue de la Paix 11A, 1202 Geneva, Switzerland |
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Abstract: | This paper focuses on the resolution of bond market crises. Episodes of bond market distress are identified using secondary market sovereign bond spreads. Duration models are used to assess the role of the global environment, domestic policy, IMF programs and political events in explaining the length of distress episodes. We find a rich set of interactions between favourable external conditions, sound macroeconomic policies and the presence of an IMF program which contribute to shorter bond market crises. |
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