Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5068548 | European Journal of Political Economy | 2009 | 14 Pages |
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.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Ludger Schuknecht, Jürgen von Hagen, Guido Wolswijk,