Bulletin n. 2-3/2012
October 2012-February 2013
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
    • Christian Aßmann, Jens Boysen-Hogrefe
    Determinants of government bond spreads in the euro area: in good times as in bad
    in Empirica: Journal of Applied Economics and Economic Policy , volume 39 n.3 ,  2012 ,  341-356
    Government bond spreads increased rapidly during the financial turmoil in the euro area. In general, government bond spreads in the euro area are attributed to solvency and liquidity risks and determinants thereof. This paper proposes the use of latent processes to model the time variation present in the evaluation of these determinants. In contrast to approaches using global measures like the US corporate bond spreads or short-term interest rates to approximate time variation, our model is also flexible enough to deal with the unfolding of the financial crisis. The findings suggest that the expected debt-to-GDP ratio explains a major part of the differences in bond yields in the euro area between 2003 and the unfolding of the financial crises. Coefficients for many determinants increased rapidly during the financial crises. Especially market capitalization gained relative importance in winter 2008/2009.
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