Advanced Search
MyIDEAS: Login to save this paper or follow this series

Policy Credibility and Sovereign Credit

Contents:

Author Info

  • Manmohan S. Kumar
  • Jirí Jonáš
  • David Hauner

Abstract

References to policy credibility, particularly with regard to fiscal policy, are ubiquitous in both economic literature and financial markets, even though it is not directly observable. The case of the EU new member states (NMS)-emerging markets joining a supranational entity that is generally considered to have higher policy credibility-provides a unique experiment to assess the effects of credibility on sovereign credit. This paper examines the impact of EU accession on three key variables that can reflect in varying degrees policy credibility: sovereign ratings, foreign currency spreads, and local currency yields. The results suggest that the NMS appear to have enjoyed higher credibility compared to their peers.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=20127
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/1.

as in new window
Length: 29
Date of creation: 01 Jan 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/1

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: European Union; Economic models; foreign currency; inflation; bond; bonds; real interest rate; bond spreads; government bond; denominated bonds; individual bonds; financial markets; sovereign bond; financial institutions; financial market; international financial statistics; effective interest rate; financial globalization; benchmark bonds; price inflation; monetary policy; domestic-currency; government bond yield; inflation rates; bond prices; financial systems; debt stock; foreign exchange; international finance; stock market volatility; bond yield; individual bond; discount rate; inflation rate; corporate bonds; government bond yields; international reserves; bond yields; bond market; corporate bond; real interest rates; monetary financing; stock market;

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(3), pages 473-91, June.
  2. Favero, Carlo A & Giavazzi, Francesco & Spaventa, Luigi, 1996. "High Yields: The Spread on German Interest Rates," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1330, C.E.P.R. Discussion Papers.
  3. Edda Zoli, 2004. "Credit Rationing in Emerging Economies' Access to Global Capital Markets," IMF Working Papers 04/70, International Monetary Fund.
  4. Dornbusch, Rudiger, 1990. "Credibility and Stabilization," CEPR Discussion Papers, C.E.P.R. Discussion Papers 454, C.E.P.R. Discussion Papers.
  5. Bernardin Akitoby & Thomas Stratmann, 2006. "Fiscal Policy and Financial Markets," IMF Working Papers 06/16, International Monetary Fund.
  6. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, Elsevier, vol. 108(1), pages 1-24, May.
  7. Riccardo Faini, 2006. "Fiscal policy and interest rates in Europe," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 21(47), pages 443-489, 07.
  8. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 943, Cowles Foundation for Research in Economics, Yale University.
  9. Allan Drazen & Paul R. Masson, 1993. "Credibility of Policies versus Credibility of Policymakers," NBER Working Papers 4448, National Bureau of Economic Research, Inc.
  10. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Oct, pages 37-53.
  11. G. William Schwert, 1990. "Why Does Stock Market Volatility Change Over Time?," NBER Working Papers 2798, National Bureau of Economic Research, Inc.
  12. Dell'Ariccia, Giovanni & Schnabel, Isabel & Zettelmeyer, Jeromin, 2006. "How Do Official Bailouts Affect the Risk of Investing in Emerging Markets?," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 38(7), pages 1689-1714, October.
  13. Hallerberg, Mark & Wolff, Guntram B., 2006. "Fiscal institutions, fiscal policy and sovereign risk premia," Discussion Paper Series 1: Economic Studies 2006,35, Deutsche Bundesbank, Research Centre.
  14. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 49(4), pages 431-34, November.
  15. David Hauner & Manmohan S. Kumar, 2005. "Financial Globalization and Fiscal Perfomance in Emerging Markets," IMF Working Papers 05/212, International Monetary Fund.
  16. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 79-113, July.
  17. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, Econometric Society, vol. 54(5), pages 1099-1128, September.
  18. Gianluigi Ferrucci, 2003. "Empirical determinants of emerging market economies' sovereign bond spreads," Bank of England working papers, Bank of England 205, Bank of England.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Martin Èihák & Srobona Mitra, 2009. "The Financial Crisis and European Emerging Economies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, Charles University Prague, Faculty of Social Sciences, vol. 59(6), pages 541-553, December.
  2. Susan Schadler & Pipat Luengnaruemitchai, 2007. "Do Economists' and Financial Markets' Perspectiveson the New Members of the Eu Differ?," IMF Working Papers 07/65, International Monetary Fund.
  3. Christiane Nickel & Philipp Rother & Jan-Christoph Ruelke, 2011. "Fiscal variables and bond spreads - evidence from Eastern European countries and Turkey," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 21(17), pages 1291-1307.
  4. Ante Žigman & Boris Cota, 2011. "The impact of fiscal policy on government bond spreads in emerging markets," Financial Theory and Practice, Institute of Public Finance, Institute of Public Finance, vol. 35(4), pages 385-412.
  5. Martin Cihák & Wim Fonteyne, 2009. "Five Years After," IMF Working Papers 09/68, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:07/1. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.