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Government Debt Issuance in the Euro Area:The Impact of the Financial Crisis

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  • International Monetary Fund
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    Abstract

    This paper documents and analyzes crisis-related changes in government debt issuance practices in the 16 euro zone countries and Denmark. Using a newly constructed database on primary market debt issuance during 2007-09, we find evidence of a shift away from pre-crisis standards of best funding practices competitive auctions of debt instruments with a fixed coupon, long maturity and local currency denomination (DLTF). Exploiting the cross-country panel data dimension of the data, we conclude that the crisis and related changes in the macroeconomic environment and investor sentiment can account for a significant proportion of the deviation. The negative effect of the crisis on DLTF debt issuance was especially pronounced in high deficit and high debt euro area countries, and has forced governments to assume additional risk.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=24603
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/21.

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    Length: 26
    Date of creation: 01 Jan 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/21

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    Postal: International Monetary Fund, Washington, DC USA
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    Related research

    Keywords: Sovereign debt; Bond issues; Debt refinancing; Global Financial Crisis 2008-2009;

    This paper has been announced in the following NEP Reports:

    References

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    1. Arnaud Mehl & Julien Reynaud, 2008. "Domestic debt structures in emerging markets : new empirical evidence," Documents de travail du Centre d'Economie de la Sorbonne bla08059, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Anna Ilyina & Anastasia Guscina & Herman Kamil, 2010. "Does Procyclical Fiscal Policy Reinforce Incentives to Dollarize Sovereign Debt?," IMF Working Papers 10/168, International Monetary Fund.
    3. Biais, Bruno & Renucci, Antoine & Saint-Paul, Gilles, 2004. "Liquidity and the Cost of Funds in the European Treasury Market," IDEI Working Papers 285, Institut d'Économie Industrielle (IDEI), Toulouse.
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    Cited by:
    1. Das, Udaibir S. & Oliva, Maria A. & Tsuda, Takahiro, 2012. "Sovereign Risk: A Macro-Financial Perspective," ADBI Working Papers 383, Asian Development Bank Institute.

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