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What Drives Sovereign Risk Premiums?: An Analysis of Recent Evidence from the Euro Area

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  • David Haugh
  • Patrice Ollivaud
  • David Turner
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    Abstract

    This paper analyses recent large movements in the yield spread for sovereign bonds as between Germany and other euro area countries. While the general increase in risk aversion that has characterised the financial crisis is an important factor on its own, it is found that this has also magnified the importance of fiscal performance, in particular as measured by the ratio of debt service to tax receipts and expected fiscal deficits. Moreover, there is evidence to suggest that such effects are non-linear, so that incremental deteriorations in fiscal performance lead to ever larger increases in the spread. These findings imply that financial market reaction could become an increasingly important constraint on fiscal policy for some countries, a feature which was much less apparent in the years prior to the financial crisis when general risk aversion was abnormally low. Quels sont les déterminants des primes de risque des États ? : Une analyse récente de la zone euro Cet article analyse les récents mouvements importants des écarts de taux des obligations d’État des pays de la zone euro avec l’Allemagne. L’augmentation généralisée de l’aversion au risque qui a accompagné la crise financière est un facteur important en soi. L’article montre en outre que ce phénomène a amplifié l’impact des performances budgétaires, en particulier quand elles sont mesurées par le ratio du service de la dette aux recettes fiscales et par les déficits budgétaires anticipés. De plus, ces effets se révèlent non linéaires, ce qui se traduit par le fait que les détériorations supplémentaires des performances budgétaires amènent à des augmentations toujours plus importantes des écarts de taux. Ces résultats suggèrent que les réactions des marchés financiers pourraient devenir une contrainte de plus en plus importante à la politique budgétaire de certains pays, une caractéristique qui était beaucoup moins visible durant les années antérieures à la crise où l’aversion générale au risque était anormalement basse.

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    File URL: http://dx.doi.org/10.1787/222675756166
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 718.

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    Date of creation: 22 Jul 2009
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    Handle: RePEc:oec:ecoaaa:718-en

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    Keywords: fiscal policy; interest rate; debt; government bonds; deficit; bond market; politique budgétaire; obligations d’État; dette; marché obligataire; taux d'intérêt; déficit budgétaire;

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    1. Spread de taux: risque de crédit, de liquidité et aversion au risque
      by contact@captaineconomics.fr (Le Captain') in Captain Economics on 2012-10-02 07:12:36
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