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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/25777
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| Title: | | Fool the markets?: Creative accounting, fiscal transparency and sovereign risk premia  |
| Authors: | | Bernoth, Kerstin Wolff, Guntram B. |
| Issue Date: | | 2006 |
| Series/Report no.: | | CESifo working paper 1732 |
| Abstract: | | We investigate the effects of official fiscal data and creative accounting signals on interest rate spreads between bond yields in the European Union. Our model predicts that risk premia contained in government bond spreads should increase in both the official fiscal position and the expected creative part of fiscal policy. The relative importance of these two signals depends on the transparency of the country. Greater transparency reduces risk premia. The empirical results confirm the hypotheses. Creative accounting increases the spread. The increase of the risk premium is stronger if financial markets are unsure about the true extent of creative accounting. Fiscal transparency reduces risk premia. |
| JEL: | | G12 E43 E62 H6 F34 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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