Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/156151
Authors: 
Steinkamp, Sven
Westermann, Frank
Year of Publication: 
2016
Series/Report no.: 
Working Paper, Institute of Empirical Economic Research, University of Osnabrück 105
Abstract: 
During Europe's sovereign-debt crisis, interest rate spreads have been highly correlated with the share of multilateral loans that were considered senior to private markets. As both variables are potentially endogenous, we follow two different approaches to analyze the direction of causality. First, we use a set of IV regressions where the differences between sovereign ratings serve as instruments. Second, we analyze a new panel-survey dataset on seniority and interest rate expectations. In both approaches, we find evidence for the seniority conundrum - i.e., a positive impact of multilateral loans on interest rate spreads.
Subjects: 
government bond spreads
creditor seniority
recovery rate
interest rate
sovereign debt
JEL: 
F34
G12
H81
Document Type: 
Working Paper

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