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http://hdl.handle.net/10419/19684
  

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dc.contributor.authorHeppke-Falk, Kirsten H.en_US
dc.contributor.authorWolff, Guntram B.en_US
dc.date.accessioned2009-01-28T16:01:59Z-
dc.date.available2009-01-28T16:01:59Z-
dc.date.issued2007en_US
dc.identifier.urihttp://hdl.handle.net/10419/19684-
dc.description.abstractWe identify investor moral hazard in the German fiscal federation. Our identification strategy is based on a variable, which was used by the German Federal Constitutional Court as an indicator to determine eligibility of two German states (Länder) to a bail-out, the interest payments-to-revenue ratio. While risk premia measured in the German sub-national bond market react significantly to the relative debt level of a state (Land), we also find that a larger interest payments-to-revenue ratio counter-intuitively lowers risk premia significantly. Furthermore, with increasing values the risk premia decrease more strongly. This is evidence of investor moral hazard, because a larger indicator value increases the likelihood of receiving a bail-out payment. Quantitatively, the effects are, however, quite small. Our findings are robust to a variety of sample changes. In addition, we provide a case study of the recent Federal Constitutional Court ruling on the Land Berlin, which had filed for additional federal funds. The negative response of the court did not lead to a change in financial markets' bail-out expectations. In sum, our results indicate significant investor moral hazard in the sub-national German bond market.en_US
dc.language.isoengen_US
dc.relation.ispartofseriesDiscussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2007,07en_US
dc.subject.jelF34en_US
dc.subject.jelH6en_US
dc.subject.jelH7en_US
dc.subject.jelG14en_US
dc.subject.jelG15en_US
dc.subject.jelE62en_US
dc.subject.ddc330en_US
dc.subject.keywordmoral hazarden_US
dc.subject.keywordbail-outen_US
dc.subject.keywordsovereign bond spreadsen_US
dc.subject.keywordfiscal federalismen_US
dc.subject.keywordGermanyen_US
dc.subject.stwLänderfinanzenen_US
dc.subject.stwÖffentliche Schuldenen_US
dc.subject.stwÖffentliche Anleiheen_US
dc.subject.stwRisikoprämieen_US
dc.subject.stwFinanzausgleichen_US
dc.subject.stwMoral Hazarden_US
dc.subject.stwSchätzungen_US
dc.subject.stwDeutschlanden_US
dc.subject.stwBerlinen_US
dc.titleMoral hazard and bail-out in fiscal federations: evidence for the German Länderen_US
dc.typeWorking Paperen_US
dc.identifier.ppn528422030en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:bubdp1:5561-
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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