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Title:Expected budget deficits and interest rate swap spreads - Evidence for France, Germany and Italy PDF Logo
Authors:Heppke-Falk, Kirsten H.
Hüfner, Felix P.
Issue Date:2004
Series/Report no.:Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2004,40
Abstract:This study analyses whether expected budget deficits have an impact on interest rate swap spreads in France, Germany and Italy. We use monthly deficit forecasts from financial market participants to take the forward-looking behaviour of financial markets into account. Results of a SUR estimation show no significant impact of expected deficits on swap spreads over the whole sample period (1994-2004). However, we find an increase in market discipline for Germany and France since the signing of the Stability and Growth Pact, and for Germany also since the start of European monetary union.
Subjects:Budget deficits
interest rate swap spreads
EMU
Stability and Growth Pact
JEL:E43
H62
E62
C33
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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