NDLI: Determinants of government bond spreads in the euro area: in good times as in bad

Content Provider	Springer Nature Link
Author	Aßmann, Christian Boysen Hogrefe, Jens
Copyright Year	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.
Starting Page	341
Ending Page	356
Page Count	16
File Format	PDF
ISSN	03408744
Journal	Empirica
Volume Number	39
Issue Number	3
e-ISSN	15736911
Language	English
Publisher	Springer US
Publisher Date	2011-06-03
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Euro area Government bond spreads Time-varying coefficients Public Finance & Economics Econometrics Industrial Organization European Integration International Economics Macroeconomics/Monetary Economics
Content Type	Text
Resource Type	Article
Subject	Geography, Planning and Development Development Economics and Econometrics

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