The determinants of sovereign credit spread changes in the Euro-zone

Journal of International Financial Markets, Institutions and Money

Volumn 22, Issue 2, 2012, Pages 278-304

  Oliveira, Luís ^a   Curto, José Dias ^a   Nunes, João Pedro ^a  

^a INSTITUTO UNIVERSITÁRIO DE LISBOA ISCTE IUL   (Portugal)

Author keywords

Credit risk; Gaussian HJM multi factor models; Structural models; Term structure of interest rates

Indexed keywords

EID: 84857115002     PISSN: 10424431     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.intfin.2011.09.007     Document Type: Article

References (65)

1. Alesina A., De Broeck M., Prati A., Tabellini G. Default risk on government debt in OECD countries. Economic Policy 1992, 15:428-463.
2. Amihud A., Mendelson H. Liquidity, maturity, and the yields on U.S. treasury securities. Journal of Finance 1991, 46:1411-1425.
3. Arghyrou, M., Kontonikas, A., 2011. The EMU sovereign-debt crisis: fundamentals, expectations and contagion. European Comission-Economic Papers No. 436.
4. Arghyrou, M., Tsoukalas, J., 2010. The Greek debt crisis: likely causes, mechanics and outcomes. CESifo Working Paper Series No. 3266.
5. Aßmann, C., Boysen-Hogrefe, J., 2009. Determinants of government bond spreads in the Euro Area-in good times as in bad. Kiel Working Papers No. 1548.
6. Attinasi, M.-G., Checherita, C., Nickel, C., 2009. What explains the surge in Euro area sovereign spreads during the financial crisis of 2007-2009? ECB Working Paper Series No. 1131.
7. Baltagi B. Econometric Analysis of Panel Data 2001, John Wiley & Sons Ltd., England. 3rd ed.
8. Barrios, S., Iversen, P., Lewandowska, M., Setzer, R., 2009. Determinants of intra-Euro area government bond spreads during the financial crisis. European Economy, Economic Papers 388.
9. Bayoumi T., Goldstein M., Woglom G. Do credit markets discipline sovereign borrowers? Evidence from US states. Journal of Money Credit and Banking 1995, 27:1046-1059.
10. Beber A., Brandt M., Kavajecz K. Flight-to-quality or flight-to-liquidity? Evidence from the Euro-area bond market. Review of Financial Studies 2009, 22:925-957.
11. Bernoth, K., von Hagen, J., Schuknecht, L., 2004. Sovereign risk premia in the European government bond market. ECB Working Paper Series, June, 3-37.
12. Bishop, G., Damrau, D., Miller, M., 1989. Market discipline can work in the EC monetary union, 1992 and beyond. Salomon Brothers, November.
13. Björk T., Christensen B. Interest rate dynamics and consistent forward rate curves. Mathematical Finance 1999, 9:323-349.
14. Black F., Cox J. Valuing corporate securities: some effects of bond indenture provisions. Journal of Finance 1976, 31:351-367.
15. Bliss R. Testing term structure estimation methods. Advances in Futures and Options Research 1997, 9:197-231.
16. Boss M., Scheicher M. The determinants of credit spread changes in the Euro area. BIS Papers 2002, 12:181-199.
17. Cantor R., Packer F. Determinants and impact of sovereign credit ratings. Economic Policy Review 1996, 53:37-54.
18. Choi I., Chue T. Subsampling hypothesis tests for nonstationary panels with applications to exchange rates and stock prices. Journal of Applied Econometrics 2007, 22:233-264.
19. Codogno L., Favero C., Missale A. Yield spreads on EMU government bonds. Economic Policy 2003, 18:505-532.
20. Collin-Dufresne P., Goldstein R. Do credit spreads reflect stationary leverage ratios?. Journal of Finance 2001, 54:9-26.
21. Collin-Dufresne P., Goldstein R., Martin J. The determinants of credit spread changes. Journal of Finance 2001, 56:2177-2207.
22. de la Fuente, A., 1997. Fiscal policy and growth in the OECD. CEPR Discussion Paper, No. 1755, December.
23. Dennis J., Schnabel R. Numerical Methods for Unconstrained Optimization and Nonlinear Equations 1996, SIAM, Philadelphia.
24. Easterly W., Rebelo S. Fiscal policy and economic growth. Journal of Monetary Economics 1993, 74:417-458.
25. Evans P., Karras G. Are government activities productive? Evidence from a panel of U.S. states. The Review of Economics and Statistics 1994, 76:1-11.
26. Faini R. Fiscal policy and interest rates in Europe. Economic Policy 2006, 21:443-489.
27. Fama E., Bliss R. The information in long maturity forward rates. American Economic Review 1987, 77:680-692.
28. Favero C., Pagano M., Von Thadden E. How does liquidity affect government bond yields. Journal of Financial and Quantitative Analysis 2010, 45:107-134.
29. Fisher, M., Nychka, D., Zervos, D., 1995. Fitting the term structure of interest rates with smoothing splines. Federal Reserve System Working Paper No. 95-1.
30. Geyer A., Kossmeier S., Pichler S. Measuring systematic risk in EMU government yield spreads. Review of Finance 2004, 8:171-197.
31. Gómez-Puig M. Size matters for liquidity: evidence from EMU sovereign yield spreads. Economics Letters 2006, 9:156-162.
32. Gómez-Puig M. The immediate effect of monetary union over EU-15's sovereign debt yield spreads. Applied Economics 2009, 41:929-939.
33. Goldstein, M., Woglom, G., 1991. Market-based fiscal discipline in monetary unions: evidence from the U.S. municipal bond market. IMF Working Paper No. 91/89.
34. Haugh, D., Ollivaud, P., Turner, D., 2009. What drives sovereign risk premiums? An analysis of recent evidence from the Euro area. OECD Economics Department Working Papers No. 718.
35. Heath D., Jarrow R., Morton A. Bond pricing and the term structure of interest rates: a new methodology for contingent claims valuation. Econometrica 1992, 60:77-105.
36. Huang J., Kong W. Explaining credit spread changes: new evidence from option-adjusted bond indexes. Journal of Derivatives 2003, 11:30-44.
37. Im K., Pesaran M., Shin Y. Testing for unit roots in heterogeneous panels. Journal of Econometrics 2003, 115:53-74.
38. Jankowitsch R., Mösenbacher H., Pichler S. Measuring the liquidity impact on EMU government bond prices. European Journal of Finance 2006, 12:153-169.
39. Jeffrey A., Linton O., Nguyen T. Flexible term structure estimation: which method is preferred?. Metrika 2006, 63:99-122.
40. Kneller R., Bleaney M., Gemmell N. Fiscal policy and growth: evidence from OECD countries. Journal of Public Economics 1999, 74:171-190.
41. Kwan S. Firm-specific information and the correlation between individual stocks and bonds. Journal of Financial Economics 1996, 40:63-80.
42. Lamberton D., Lapeyre B. Introduction to Stochastic Calculus Applied to Finance 1996, Chapman & Hall/CRC, London.
43. Leland H. Corporate debt value bond covenants and optimal capital structure. Journal of Finance 1994, 49:1213-1252.
44. Lemmen J., Goodhart C. Credit risks and European government bond markets: a panel data econometric analysis. Eastern Economic Journal 1999, 25:77-107.
45. Levin A., Lin C., Chu C. Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics 2002, 108:1-24.
46. Litterman R., Scheinkman J. Common factors affecting bond returns. Journal of Fixed Income 1991, 1:54-61.
47. Longstaff F., Schwartz E. A simple approach to valuing risky fixed and floating rate debt. Journal of Finance 1995, 50:789-819.
48. Manasse, P., Roubini, N., Schimmelpfennig, A., 2003. Predicting sovereign debt crises. IMF Working Paper No. 03/221.
49. Manganelli S., Wolswijk G. What drives spreads in the euro area government bond market?. Economic Policy 2009, 24:191-240.
50. McCulloch J. Measuring the term structure of interest rates. Journal of Business 1971, 44:19-31.
51. Merton R. On the pricing of corporate debt: the risk structure of interest rates. Journal of Finance 1974, 29:449-470.
52. Musiela M., Rutkowski M. Martingale Methods in Financial Modeling. Applications of Mathematics: Stochastic Modeling and Applied Probability 1998, vol. 36. Springer-Verlag, Berlin, Heidelberg.
53. Nelson C., Siegel A. Parsimonious modeling of yield curves. Journal of Business 1987, 60:473-489.
54. Nunes J., Oliveira L. Multifactor and analytical valuation of treasury bond futures with an embedded quality option. Journal of Futures Markets 2007, 27:275-303.
55. Pagano M., von Thadden E. The European bond markets under EMU. Oxford Review of Economic Policy 2004, 20:531-554.
56. Rousseeuw P. Robust estimation and identifying outliers. Handbook of Statistical Methods for Engineers and Scientists 1990, 16.1-16.24. McGraw-Hill, New York, chapter 16. H. Wadsworth (Ed.).
57. Schuknecht, J., von Hagen, J., Wolswijk, G., 2010. Government bond risk premiums in the EU - revisited the impact of the financial crisis. ECB Working Paper Series No. 1152.
58. Sgherri, S., Zoli, E., 2009. Euro Area sovereign risk during the crisis. IMF Working Paper No. 09/222.
59. STOXX, Limited, Guide to the Dow Jones EURO STOXX 50 Volatility Index (VSTOXX), 2005.
60. STOXX, Limited, Dow Jones STOXX Index Guide, 2006.
61. Theobald, M., King, M., Bordewich, M., Rappoport, P., 1999. Valuing market liquidity. Working paper, JP Morgan.
62. Van Landschoot, A., 2004a, Determinants of Euro term structure of credit spreads. ECB Working Paper Series No. 397.
63. Van Landschoot A. Sovereign credit spreads and the composition of the government budget. Review of World Economics 2004, 140:510-524.
64. Vasiček O., Fong H. Term structure modeling using exponential splines. Journal of Finance 1982, 37:339-348.
65. Waggoner, D., 1997. Spline method for extracting interest rate curves from coupon bond prices. Working paper, Federal Reserve Bank of Atlanta.