Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5088993 | Journal of Banking & Finance | 2014 | 22 Pages |
Abstract
Against the background of the current debate about fiscal sustainability in several advanced economies, this paper estimates determinants of G7 sovereign bond spreads, using high-frequency proxies for market expectations about macroeconomic fundamentals and allowing for time-varying parameters. The paper finds substantial asymmetry in the importance of country fundamentals and considerable time variations in the pricing of risks. There has been a reduced pricing of several risk factors in the years preceding the financial crisis, and either an over-pricing of risk or the pricing of a re-denomination risk of euro area bonds during the European sovereign debt crisis, a pattern that does not apply to the non-euro area G7 bonds.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Antonello D'Agostino, Michael Ehrmann,