Fiscal positions and government bond yields in OECD countries
We examine the impact of fiscal positions, both the level of debt and the fiscal balance, on long-term government bond yields in the OECD. In order to control for the endogenity of fiscal positions to the business cycle we utilize forward projections of fiscal positions from the OECD's Economic Outlook. In a panel regression over the period from 1988 to 2007, we find a robust and significant effect of fiscal performance on long-term bond yields. Our estimates imply that the marginal effect of the projected deterioration of fiscal positions associated with the recent financial crisis is to add about 60 basis points to U.S. bond yields by 2015, with effects on other G7 bond yields generally being smaller.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551|
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/ifdp/order.htm|
When requesting a correction, please mention this item's handle: RePEc:fip:fedgif:1011. 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: (Franz Osorio)
If references are entirely missing, you can add them using this form.