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Assessing the Pre-Crisis Advantages of the EMU for Sovereign Debt Issuers: A Panel VAR Analysis

Author

Listed:
  • Luigi Marattin

    (Università di Bologna)

  • Paolo Paesani

    (Università di Roma Tor Vergata)

  • Simone Salotti

    (National University of Ireland Galway)

Abstract

We study the relationship between public debt and the real long-term interest rates in the countries currently members of the European Monetary Union (EMU) to assess its long-run macroeconomic performance. We employ a panel VAR method using annual data from 1970 to 2008. We find that before the introduction of the euro different levels of public debt affected the responses of the interest rates to debt shocks, with larger effects in high-debt countries relatively to lowdebt ones. The inclusion of the EMU years, shows the stabilizing role played by the monetary union in insulating the interest rates from domestic fiscal developments.

Suggested Citation

  • Luigi Marattin & Paolo Paesani & Simone Salotti, 2012. "Assessing the Pre-Crisis Advantages of the EMU for Sovereign Debt Issuers: A Panel VAR Analysis," Rivista di Politica Economica, SIPI Spa, issue 1, pages 7-22, January-M.
    • Handle: RePEc:rpo:ripoec:y:2012:i:1:p:7-22
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    Citations

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    Cited by:

    1. Mario Sarcinelli, 2012. "Euro crisis or public debt crisis? With a remedy for the latter case," PSL Quarterly Review, Economia civile, vol. 65(262), pages 215-236.
    2. Florence Bouvet & Ryan Brady & Sharmila King, 2013. "Debt Contagion in Europe: A Panel-Vector Autoregressive (VAR) Analysis," Social Sciences, MDPI, vol. 2(4), pages 1-23, December.

    More about this item

    Keywords

    public debt; long-term interest rate; European Monetary Union; panel VAR;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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