What Drives Spreads in the Euro Area Government Bond Market?
Economic Policy, 2009, 58, 191-240
MANGANELLI, Simone, WOLSWIJK, Guido, RAVN, Morten O., THESMAR, David, What Drives Spreads in the Euro Area Government Bond Market?, Economic Policy, 2009, 58, 191-240 - http://hdl.handle.net/1814/16547
Retrieved from Cadmus, EUI Research Repository
Spreads between euro area government bond yields are related to short-term interest rates, which are in turn related to market liquidity, to cyclical conditions, and to investors' incentives to take risk. In theory, lower interest rates are associated with lower degrees of risk aversion and smaller government bond spreads. Empirically, the Eurosystem's short-term interest rates are positively related to those spreads, which our econometric model finds to include significant and policy-relevant default risk and liquidity risk components. - Simone Manganelli and Guido Wolswijk.
Cadmus permanent link: http://hdl.handle.net/1814/16547
Full-text via DOI: 10.1111/j.1468-0327.2009.00220.x
Publisher: Wiley-Blackwell Publishing, Inc
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