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Fiscal variables and bond spreads - evidence from Eastern European countries and Turkey

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  • Christiane Nickel
  • Philipp Rother
  • Jan-Christoph Ruelke

Abstract

We investigate the impact of fiscal variables on bond yield spreads relative to US Treasury bonds in the Czech Republic, Hungary, Poland, Russia and Turkey from May 1998 to December 2007. To account for the importance of market expectations we use projected values for fiscal and macroeconomic variables generated from Consensus Economics Forecasts. Moreover, we compare results from panel regressions with those from country (seemingly unrelated regression) estimates. We find that, contrary to the evidence suggested by panel estimations, the role of the individual explanatory variables, including the importance of fiscal variables, varies significantly across countries when using the SUR specification.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09603107.2011.570711
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 21 (2011)
Issue (Month): 17 ()
Pages: 1291-1307

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Handle: RePEc:taf:apfiec:v:21:y:2011:i:17:p:1291-1307

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Related research

Keywords: budget deficits; determination of interest rates; fiscal policy; Eastern European countries;

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References

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Cited by:
  1. D'Agostino, Antonello & Ehrmann, Michael, 2013. "The pricing of G7 sovereign bond spreads: the times, they are a-changin," Working Paper Series 1520, European Central Bank.
  2. Georg Stadtmann & Christian Pierdzioch & Jan Ruelke, 2011. "Scattered Fiscal Forecasts," Economics Bulletin, AccessEcon, vol. 31(3), pages 2558-2568.
  3. Afonso, António & Martins, Manuel M.F., 2010. "Level, slope, curvature of the sovereign yield curve, and fiscal behaviour," Working Paper Series 1276, European Central Bank.

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