Template-type: ReDif-Paper 1.0
Author-Name: Fazlioglu, S.
Author-workplace-name: Macro, International & Labour Economics
Title: Determinants of sovereign debt yield spreads under EMU: Pairwise approach
Abstract: This study aims at providing an empirical analysis of long-term determinants of sovereign debt<br/>yield spreads under European EMU (Economic and Monetary Union) through pairwise approach<br/>within panel framework. Panel gravity models are increasingly used in the cross-market<br/>correlation literature while to our knowledge, this is the first empirical study employing the<br/>method in the bond market literature. Accordingly, sovereign yield spreads are positively related<br/>to differential government debt ratio while negatively related to relative economic growth<br/>performance, differential liquidity of the individual debt markets as well as governance quality.<br/>Moreover, non-linear dynamic panel estimates indicate that markets seem to ignore fundamentals<br/>after the emerge of EMU while the very same risk factors are revalued by the markets after<br/>the 2008/2009 financial crisis. Furthermore, markets price fiscal indebtedness more among the<br/>EMU members than among the non-EMU members. Finally, the results of the dynamic panel<br/>model are robust to different estimation techniques such as GMM as well as sample selection.<br/>
Series: GSBE Research Memoranda
Creation-Date: 20130101
Number: 007
File-URL: https://cris.maastrichtuniversity.nl/ws/files/1085414/guid-9120df8b-ae54-4b24-87bf-9eaa6ae4eebf-ASSET1.0.pdf
File-Format: application/pdf
File-Size: 398910
Handle: Repec:unm:umagsb:2013007
DOI: 10.26481/umagsb.2013007