IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-00787175.html
   My bibliography  Save this paper

Government debt denomination policies before and after the EMU advent

Author

Listed:
  • G. Hübner
  • R. Joliet

    (UMR CNRS 8179 - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

Abstract

Through a cost-minimizing approach, this paper derives joint indicators to assess the efficiency of the mix of sovereign debt currencies between the countries belonging to the European Monetary Union (EMU). This theoretical insight enables us to explain why and how the introduction of the euro and the adoption of a common monetary policy may have led to significant changes in debt structure among EMU members, notably in favor of further euro-denominated debt. The interplay of intrinsic and strategic variables yields stylized facts that are consistent with country-specific empirical evidence. Following the sovereign debt crisis, we further emphasize the value-added of a coordinated debt issuance policy among EMU countries.

Suggested Citation

  • G. Hübner & R. Joliet, 2013. "Government debt denomination policies before and after the EMU advent," Post-Print hal-00787175, HAL.
    • Handle: RePEc:hal:journl:hal-00787175
    DOI: 10.1007/s11079-011-9238-9
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fleming, Michael J, 2002. "Are Larger Treasury Issues More Liquid? Evidence from Bill Reopenings," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(3), pages 707-735, August.
    2. Roberto Blanco, 2002. "Euro area government securities markets: recent developments and implications for market functioning," BIS Papers chapters, in: Bank for International Settlements (ed.), Market functioning and central bank policy, volume 12, pages 65-85, Bank for International Settlements.
    3. Marta Gómez†Puig, 2009. "Systemic and Idiosyncratic Risk in EU†15 Sovereign Yield Spreads after Seven Years of Monetary Union," European Financial Management, European Financial Management Association, vol. 15(5), pages 971-1000, November.
    4. Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2004. "Sovereign risk premia in the European government bond market," ZEI Working Papers B 26-2003, University of Bonn, ZEI - Center for European Integration Studies.
    5. Gómez-Puig, Marta, 2008. "Monetary integration and the cost of borrowing," Journal of International Money and Finance, Elsevier, vol. 27(3), pages 455-479, April.
    6. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    7. Arnold, Ivo & Lemmen, Jan, 2001. "The Vulnerability of Banks to Government Default Risk in the EMU," International Finance, Wiley Blackwell, vol. 4(1), pages 101-125, Spring.
    8. Favero, Carlo & Pagano, Marco & von Thadden, Ernst-Ludwig, 2010. "How Does Liquidity Affect Government Bond Yields?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(1), pages 107-134, February.
    9. Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 155-178, February.
    10. Bohn, Henning, 1990. "A positive theory of foreign currency debt," Journal of International Economics, Elsevier, vol. 29(3-4), pages 273-292, November.
    11. Favero, Carlo A & Giavazzi, Francesco & Spaventa, Luigi, 1997. "High Yields: The Spread on German Interest Rates," Economic Journal, Royal Economic Society, vol. 107(443), pages 956-985, July.
    12. Attinasi, Maria Grazia & Checherita-Westphal, Cristina & Nickel, Christiane, 2009. "What explains the surge in euro area sovereign spreads during the financial crisis of 2007-09?," Working Paper Series 1131, European Central Bank.
    13. Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2009. "Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market," The Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 925-957, March.
    14. David Haugh & Patrice Ollivaud & David Turner, 2009. "What Drives Sovereign Risk Premiums?: An Analysis of Recent Evidence from the Euro Area," OECD Economics Department Working Papers 718, OECD Publishing.
    15. Ivo Arnold & Jan Lemmen, 2001. "The Vulnerability of Banks to Government Default Risk in the EMU," International Finance, Wiley Blackwell, vol. 4(1), pages 101-125.
    16. Lorenzo Codogno & Carlo Favero & Alessandro Missale, 2003. "Yield spreads on EMU government bonds [‘Fiscal policy events and interest rate swap spreads: some evidence from the EU’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 18(37), pages 503-532.
    17. Crabbe, Leland E & Turner, Christopher M, 1995. "Does the Liquidity of a Debt Issue Increase with Its Size? Evidence from the Corporate Bond and Medium-Term Note Markets," Journal of Finance, American Finance Association, vol. 50(5), pages 1719-1734, December.
    18. R. Jankowitsch & H. Mosenbacher & S. Pichler, 2006. "Measuring the liquidity impact on EMU government bond prices," The European Journal of Finance, Taylor & Francis Journals, vol. 12(2), pages 153-169.
    19. Alois Geyer & Stephan Kossmeier & Stefan Pichler, 2004. "Measuring Systematic Risk in EMU Government Yield Spreads," Review of Finance, European Finance Association, vol. 8(2), pages 171-197.
    20. Warga, Arthur, 1992. "Bond Returns, Liquidity, and Missing Data," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(4), pages 605-617, December.
    21. Amihud, Yakov & Mendelson, Haim, 1991. "Liquidity, Maturity, and the Yields on U.S. Treasury Securities," Journal of Finance, American Finance Association, vol. 46(4), pages 1411-1425, September.
    22. Missale, Alessandro & Blanchard, Olivier Jean, 1994. "The Debt Burden and Debt Maturity," American Economic Review, American Economic Association, vol. 84(1), pages 309-319, March.
    23. Duffie, Darrell & Singleton, Kenneth J, 1999. "Modeling Term Structures of Defaultable Bonds," The Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 687-720.
    24. Ejsing, Jacob & Lemke, Wolfgang, 2009. "The Janus-headed salvation: sovereign and bank credit risk premia during 2008-09," Working Paper Series 1127, European Central Bank.
    25. Kamara, Avraham, 1994. "Liquidity, Taxes, and Short-Term Treasury Yields," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(3), pages 403-417, September.
    26. Dermine, Jean & Hillion, Pierre (ed.), 1999. "European Capital Markets with a Single Currency," OUP Catalogue, Oxford University Press, number 9780198295396.
    27. Babbel, David F. & Merrill, Craig B. & Meyer, Mark F. & de Villiers, Meiring, 2004. "The Effect of Transaction Size on Off-the-Run Treasury Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(3), pages 595-611, September.
    28. Bohn, Henning, 1988. "Why do we have nominal government debt?," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 127-140, January.
    29. Ejsing, Jacob & Lemke, Wolfgang, 2011. "The Janus-headed salvation: Sovereign and bank credit risk premia during 2008-2009," Economics Letters, Elsevier, vol. 110(1), pages 28-31, January.
    30. Alois Geyer & Stephan Kossmeier & Stefan Pichler, 2004. "Measuring Systematic Risk in EMU Government Yield Spreads," Review of Finance, Springer, vol. 8(2), pages 171-197.
    31. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
    32. Riccardo Faini, 2006. "Fiscal policy and interest rates in Europe [‘Computing robust standard errors for within-group estimators’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(47), pages 444-489.
    33. Simone Manganelli & Guido Wolswijk, 2009. "What drives spreads in the euro area government bond market? [‘What “hides” behind sovereign debt ratings?’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(58), pages 191-240.
    34. Gomez-Puig, Marta, 2006. "Size matters for liquidity: Evidence from EMU sovereign yield spreads," Economics Letters, Elsevier, vol. 90(2), pages 156-162, February.
    35. von Hagen, Jurgen & Schuknecht, Ludger & Bernoth, Kerstin, 2004. "Sovereign Risk Premia in the European Bond Market," CEPR Discussion Papers 4465, C.E.P.R. Discussion Papers.
    36. Michael Kremer & Paras Mehta, 2000. "Globalization and International Public Finance," NBER Working Papers 7575, National Bureau of Economic Research, Inc.
    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


    Cited by:

    1. Robert Joliet & Rabia Nessah, 2016. "Euro White and Euro Yolk: Sovereign Debt Structure Stability in the Eurozone," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 18(03), pages 1-15, September.
    2. Vahagn Galstyan & Adnan Velic, 2018. "International Investment Patterns: the Case of German Sectors," Open Economies Review, Springer, vol. 29(3), pages 665-685, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oliveira, Luís & Curto, José Dias & Nunes, João Pedro, 2012. "The determinants of sovereign credit spread changes in the Euro-zone," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 278-304.
    2. Arghyrou, Michael G. & Kontonikas, Alexandros, 2012. "The EMU sovereign-debt crisis: Fundamentals, expectations and contagion," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 658-677.
    3. Ms. Edda Zoli & Ms. Silvia Sgherri, 2009. "Euro Area Sovereign Risk During the Crisis," IMF Working Papers 2009/222, International Monetary Fund.
    4. Samir Kadiric, 2020. "The determinants of sovereign risk premiums in the UK and the European government bond market: The impact of Brexit," EIIW Discussion paper disbei271, Universitätsbibliothek Wuppertal, University Library.
    5. Gerlach, Stefan & Wolff, Guntram B. & Schulz, Alexander, 2010. "Banking and Sovereign Risk in the Euro Area," CEPR Discussion Papers 7833, C.E.P.R. Discussion Papers.
    6. Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2012. "Sovereign risk premiums in the European government bond market," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 975-995.
    7. António Afonso & Michael G. Arghyrou & Alexandros Kontonikas, 2012. "The determinants of sovereign bond yield spreads in the EMU," Working Papers 2012_14, Business School - Economics, University of Glasgow.
    8. Samir Kadiric, 2022. "The determinants of sovereign risk premiums in the UK and the European government bond market: the impact of Brexit," International Economics and Economic Policy, Springer, vol. 19(2), pages 267-298, May.
    9. Georgoutsos, Dimitris A. & Migiakis, Petros M., 2013. "Heterogeneity of the determinants of euro-area sovereign bond spreads; what does it tell us about financial stability?," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4650-4664.
    10. Arru, Daniela & Iacovoni, Davide & Monteforte, Libero & Pericoli, Filippo Maria, 2012. "EMU sovereign spreads and macroeconomic news," MPRA Paper 37200, University Library of Munich, Germany.
    11. Ejsing, Jacob & Lemke, Wolfgang, 2011. "The Janus-headed salvation: Sovereign and bank credit risk premia during 2008-2009," Economics Letters, Elsevier, vol. 110(1), pages 28-31, January.
    12. Bernoth, Kerstin & Erdogan, Burcu, 2012. "Sovereign bond yield spreads: A time-varying coefficient approach," Journal of International Money and Finance, Elsevier, vol. 31(3), pages 639-656.
    13. Fazlioglu, S., 2013. "Determinants of sovereign debt yield spreads under EMU: Pairwise approach," Research Memorandum 007, Maastricht University, Graduate School of Business and Economics (GSBE).
    14. Sha Liu, 2014. "The Impact of Textual Sentiment on Sovereign Bond Yield Spreads: Evidence from the Eurozone Crisis," Multinational Finance Journal, Multinational Finance Journal, vol. 18(3-4), pages 215-248, September.
    15. Luciana Barbosa & Sónia Costa, 2010. "Determinants of the sovereign bond yield spreads in the Euro Area in the context of the economic and financial crisis," Working Papers w201022, Banco de Portugal, Economics and Research Department.
    16. Borgy, V. & Laubach, T. & Mésonnier, J-S. & Renne, J-P., 2011. "Fiscal Sustainability, Default Risk and Euro Area Sovereign Bond Spreads Markets," Working papers 350, Banque de France.
    17. Britta Niehof, 2014. "Spillover Effects in Government Bond Spreads: Evidence from a GVAR Model," MAGKS Papers on Economics 201458, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    18. van Riet, Ad, 2010. "Euro area fiscal policies and the crisis," Occasional Paper Series 109, European Central Bank.
    19. Christian Aßmann & Jens Boysen-Hogrefe, 2012. "Determinants of government bond spreads in the euro area: in good times as in bad," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(3), pages 341-356, August.
    20. António Afonso & João Tovar Jalles, 2020. "Economic volatility and sovereign yields’ determinants: a time-varying approach," Empirical Economics, Springer, vol. 58(2), pages 427-451, February.

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F3 - International Economics - - International Finance
    • H6 - Public Economics - - National Budget, Deficit, and Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00787175. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.