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dc.contributor.authorHeppke-Falk, Kirsten H.en
dc.contributor.authorWolff, Guntram B.en
dc.date.accessioned2009-01-28T16:01:59Z-
dc.date.available2009-01-28T16:01:59Z-
dc.date.issued2007-
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
dc.language.isoengen
dc.publisher|aDeutsche Bundesbank |cFrankfurt a. M.en
dc.relation.ispartofseries|aDiscussion Paper Series 1 |x2007,07en
dc.subject.jelF34en
dc.subject.jelH6en
dc.subject.jelH7en
dc.subject.jelG14en
dc.subject.jelG15en
dc.subject.jelE62en
dc.subject.ddc330en
dc.subject.keywordmoral hazarden
dc.subject.keywordbail-outen
dc.subject.keywordsovereign bond spreadsen
dc.subject.keywordfiscal federalismen
dc.subject.keywordGermanyen
dc.subject.stwLänderfinanzenen
dc.subject.stwÖffentliche Schuldenen
dc.subject.stwÖffentliche Anleiheen
dc.subject.stwRisikoprämieen
dc.subject.stwFinanzausgleichen
dc.subject.stwMoral Hazarden
dc.subject.stwSchätzungen
dc.subject.stwDeutschlanden
dc.subject.stwBerlinen
dc.titleMoral hazard and bail-out in fiscal federations: evidence for the German Länder-
dc.typeWorking Paperen
dc.identifier.ppn528422030en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:bubdp1:5561en

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