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Risk premium as an economic policy objective: The Spanish case

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  • Indalecio Perez
  • Pablo Castellanos
  • Jose Manuel Sanchez-Santos

Abstract

This paper tries to analyse to what extent the Spanish public debt risk premium is related with the Spanish economic fundamentals. A cointegration analysis of different economic variables (public or private debt/GDP, inflation, unemployment and borrowing capacity) from 1990 to 2012 does not allow us to confirm strongly the long term relationship between the risk premium and the referred variables. There is not enough evidence to show that premium risk is determined by Spanish economic fundamentals in the long term. Therefore, the referred spread role as an economic policy objective should be relativized since it cannot be proved that tackling the analysed economic variables could reduce the spread significantly.

Suggested Citation

  • Indalecio Perez & Pablo Castellanos & Jose Manuel Sanchez-Santos, 2013. "Risk premium as an economic policy objective: The Spanish case," Economics and Business Letters, Oviedo University Press, vol. 2(3), pages 94-104.
    • Handle: RePEc:ove:journl:aid:10002
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/10002
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    Cited by:

    1. Pablo Castellanos García & Indalecio Pérez Díaz del Río & Jose Manuel Sanchez-Santos, 2014. "The role of confidence in the evolution of the Spanish economy: empirical evidence from an ARDL model," European Journal of Government and Economics, Europa Grande, vol. 3(2), pages 148-161, December.

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