Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79848
Authors: 
Westermann, Frank
Steinkamp, Sven
Year of Publication: 
2013
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: Bond and Stock Prices A21-V3
Abstract: 
The recent increase of interest rate spreads in Europe and their apparent detachment from underlying fundamental variables has generated a debate on multiple equilibria in the sovereign bond market (see De Grauwe and Ji (2012)). We critically evaluate this hypothesis, by pointing towards an alternative explanation: the increasing share of senior lenders (IMF, ECB, EFSF, etc.) in the total outstanding government debt of countries in crisis. We illustrate the close relationship between senior tranche lending including Target2 balances and recent developments in the sovereign bond market, both graphically and in a formal regression analysis.
JEL: 
F34
G12
H81
Document Type: 
Conference Paper

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