Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153565 
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper No. 1131
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper uses a dynamic panel approach to explain the determinants of widening sovereign bond yield spreads vis-à-vis Germany in selected euro area countries during the period end-July 2007 to end-March 2009, when the financial turmoil developed into a full-blown financial and economic crisis. Emphasis is given to the role of fiscal fundamentals and government announcements of substantial bank rescue packages. The paper finds that higher expected budget deficits and/or higher government debt ratios relative to Germany contributed to higher government bond yield spreads in the euro area during the analysed period. More importantly, the announcements of bank rescue packages have led to a re-assessment, from the part of investors, of sovereign credit risk, first and foremost through a transfer of risk from the private financial sector to the government.
Subjects: 
Fiscal Announcements
Fiscal Policy
Sovereign Spreads
JEL: 
E62
E43
G12
Document Type: 
Working Paper

Files in This Item:
File
Size
991.45 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.