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http://hdl.handle.net/10419/28375
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| Title: | | Determinants of government bond spreads in the Euro Area: in good times as in bad  |
| Authors: | | Aßmann, Christian Boysen-Hogrefe, Jens |
| Issue Date: | | 2009 |
| Series/Report no.: | | Kiel working paper 1548 |
| Abstract: | | Despite the single currency, yields on government bonds in the Euro Area deviate from German bond yields. These bond spreads are usually attributed to differing default and liquidity risks. Recent research points out that time-varying global factors, approximated by risk measures or short term interest rates, play an important role for the evaluation of theses risks. In this paper, instead of proxy variables latent processes are assumed to model the aforementioned time variation. We find, that default risks measured via expected debt-to-GDP ratio explain a good stake of the variation of bond spreads in the Euro area at least between 2003 and the take-off of the financial crisis. During the financial crisis default risks or rather their evaluation increased but lost relative importance compared to liquidity risks. |
| Subjects: | | Euro Area bond spreads time-varying coefficients liquidity risk default risk |
| JEL: | | C32 G12 E43 E62 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Kieler Arbeitspapiere, IfW
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