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The impact of fiscal rules on sovereign risk premia: International evidence

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  • Thornton, John
  • Vasilakis, Chrysovalantis

Abstract

We examine whether adopting a numerical fiscal rule framework to guide fiscal policy helps reduce sovereign risk premia in a sample of advanced and developing countries for 1985–2012. We address the self-selection problem of policy adoption by applying propensity score matching methods. The results suggest that adopting fiscal rules reduces sovereign risk premia.

Suggested Citation

  • Thornton, John & Vasilakis, Chrysovalantis, 2017. "The impact of fiscal rules on sovereign risk premia: International evidence," Finance Research Letters, Elsevier, vol. 20(C), pages 63-67.
    • Handle: RePEc:eee:finlet:v:20:y:2017:i:c:p:63-67
    DOI: 10.1016/j.frl.2016.09.008
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    17. Thornton, John & Vasilakis, Chrysovalantis, 2016. "Does inflation targeting reduce sovereign risk? Further evidence," Finance Research Letters, Elsevier, vol. 18(C), pages 237-241.
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    Citations

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    Cited by:

    1. Sawadogo, Pegdéwendé Nestor, 2020. "Can fiscal rules improve financial market access for developing countries?," Journal of Macroeconomics, Elsevier, vol. 65(C).
    2. Afonso, António & Alves, José, 2019. "Short and long-term interest rate risk: The sovereign balance-sheet nexus," Finance Research Letters, Elsevier, vol. 31(C).
    3. Csaba G. Tóth, 2019. "Valuable legacy? The effect of inherited fiscal rules," Public Choice, Springer, vol. 178(1), pages 3-30, January.
    4. Bergman, U. Michael & Hutchison, Michael M. & Hougaard Jensen, Svend E., 2019. "European policy and markets: Did policy initiatives stem the sovereign debt crisis in the euro area?," European Journal of Political Economy, Elsevier, vol. 57(C), pages 3-21.
    5. Ablam Estel Apeti & Bao-We-Wal Bambe & Jean-Louis Combes & Eyah Denise Edoh, 2023. "Original Sin: Fiscal Rules and Government Debt in Foreign Currency in Developing Countries," Working Papers hal-04130477, HAL.
    6. Tóth, Csaba G., 2017. "Own or inherited? The effect of national fiscal rules after changes of government," MPRA Paper 81178, University Library of Munich, Germany.
    7. Csaba G. Tóth & Dávid Berta, 2017. "Fiscal Rules," MNB Handbook, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 2(14), pages 1-60.
    8. Andrian, Leandro Gaston & Valencia, Oscar & Hirs, Jorge & Urrea Rios, Ivan Leonardo, 2022. "Fiscal Rules and Economic Cycles: Quality (Always) Matters," IDB Publications (Working Papers) 12639, Inter-American Development Bank.
    9. López-Herrera, Carmen & Cordero, José M. & Pedraja-Chaparro, Francisco & Polo, Cristina, 2023. "Fiscal rules and their influence on public sector efficiency," MPRA Paper 119018, University Library of Munich, Germany.

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    More about this item

    Keywords

    Sovereign risk; Fiscal rules; Propensity score matching;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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