Sovereign risk premia

• Verfasst von: Heinemann, Friedrich [VerfasserIn]
• Verfasst von: Osterloh, Steffen [VerfasserIn]
• Verfasst von: Kalb, Alexander [VerfasserIn]
• Titel: Sovereign risk premia
• Titelzusatz: the link between fiscal rules and stability culture
• Verf.angabe: Friedrich Heinemann, Steffen Osterloh, Alexander Kalb
• E-Jahr: 2014
• Jahr: March 2014
• Umfang: 18 S.
• Fussnoten: Gesehen am 22.09.2020
• Titel Quelle: Enthalten in: Journal of international money and finance
• Ort Quelle: Amsterdam [u.a.] : Elsevier Science, 1982
• Jahr Quelle: 2014
• Band/Heft Quelle: 41(2014), Seite 110-127
• ISSN Quelle: 0261-5606
• DOI: doi:10.1016/j.jimonfin.2013.11.002
• Datenträger: Online-Ressource
• Sprache: eng
• Sach-SW: Bond markets
• Sach-SW: Debt crisis
• Sach-SW: Fiscal preferences
• Sach-SW: Fiscal rules
• Sach-SW: Sovereign risk premia
• K10plus-PPN: 173353332X

Abstract

There is a growing empirical literature studying whether permanent constraints on fiscal policy, such as fiscal rules, reduce sovereign risk premia. Nevertheless, it remains an open question whether these rules are effective genuinely or just because they mirror fiscal preferences of politicians and voters. In our analysis of European bond spreads before the financial crisis, we shed light on this issue by employing several types of stability preference related proxies. These proxies refer to a country's past stability performance, government characteristics and survey results related to general trust. We find evidence that these preference indicators affect sovereign bond spreads and dampen the measurable impact of fiscal rules. Yet, the interaction of stability preferences and rules points to a particular potential of fiscal rules to restore market confidence in countries with a historical lack of stability culture.