Sovereign bond spread drivers in EU market in the aftermath of the global financial crisis
Résumé
Recently the world economy was confronted to the wo
rst financial crisis since
the great depression. This unprecedented crisis sta
rted in mid-2007 had a huge impact
on the European government bond market. But, what a
re the main drivers of this
“perfect storm” that since 2009 affects EU governme
nt bond market as well? To answer
this question, we propose an empirical study of the
determinants of the sovereign bond
spreads of EU countries with respect to Germany dur
ing the period 2003-2010.
Technically, we address two main questions. First,
we ask what proportion of the change
in sovereign bond spreads is explained by changes i
n the fundamentals, external factors,
liquidity and market risks. Second, we distinguish
between EU member states within
and outside the Euro area and question whether long
-run determinants of spreads affect
EU members uniformly. To these ends, we employ pane
l data techniques in a regression
model where spreads to Germany (with virtually no d
efault risk) are explained by set of
traditional variables as well as a number of policy
variables. Results reveal that large
fiscal deficits and public debt, as well as liquidi
ty and political risks are likely to put
substantial upward pressures on sovereign bond yiel
ds in many advanced European
economies over the medium term.
Domaines
Sciences du Vivant [q-bio]
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Matei Cheptea IAES final_1.pdf (181.02 Ko)
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Matei Cheptea EEA 2013_{4A4E5241-983E-4FD5-AC4B-C52B56F1CD56}-1_2.pdf (227.75 Ko)
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Origine : Fichiers produits par l'(les) auteur(s)
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