Fiscal institutions, fiscal policy and sovereign risk premia

Arbeitspapier

We investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest spreads contained in bond yields of the countries now belonging to the Eurozone. Deficits significantly increase risk premia measured by relative swap spreads. The effect of deficits is significantly lower under EMU. This effect partly results from neglecting the role of fiscal institutions. After controlling for institutional changes, fiscal policy remains a significant determinant of risk premia. We find that better institutions are connected with lower risk premia. Furthermore deficits and surpluses matter less for risk premia in countries with better institutions. This reflects the market perception, that better institutions will reduce fiscal dificulties and make the monitoring of annual developments less important. The results are robust to controlling for country fixed effects and different estimation methodologies.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper Series 1 ; No. 2006,35

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; National Budget; Budget Systems ; National Deficit; Surplus ; Asset Pricing; Trading Volume; Bond Interest Rates ; International Financial Markets ; Fiscal Policy
• Thema: Budget institutions ; fiscal rules ; sovereign risk premia ; EMU ; fiscal policy ; government bond yields ; Finanzpolitik ; Regelgebundene Politik ; Haushaltsdefizit ; Öffentliche Schulden ; Öffentliche Anleihe ; Länderrisiko ; Risikoprämie ; Schätzung ; Europäische Wirtschafts- und Währungsunion ; EU-Staaten

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Hallerberg, Mark ; Wolff, Guntram B.
• Ereignis: Veröffentlichung
• (wer): Deutsche Bundesbank
• (wo): Frankfurt a. M.
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/19664
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ