IDEAS home Printed from https://ideas.repec.org/p/ise/remwps/wp04022026.html

New evidence on the macroeconomic, fiscal and political drivers of sovereign bond spreads in the EMU

Author

Listed:
  • Frederico Silva Leal

Abstract

This paper assesses the relevance of macroeconomic, fiscal and political factors as determinants of sovereign yield spreads for 15 Euro Area Member States, using quarterly data for the period Q1:1999–Q4:2024. The results show that fiscal fundamentals, inflation and liquidity stress are the main drivers of spreads, while the QE regime reduced the sensitivity of spreads to debt levels. Political influences are selective: electoral periods raise sovereign risk only in highly indebted countries, whereas liberalising reforms are associated with lower spreads. Overall, the findings highlight the regime-dependent nature of sovereign risk pricing and provide updated evidence on how fiscal and political information is incorporated under different policy environments, offering a clearer understanding of how markets reassess sovereign risk as institutional and macro-financial conditions evolve.

Suggested Citation

  • Frederico Silva Leal, 2026. "New evidence on the macroeconomic, fiscal and political drivers of sovereign bond spreads in the EMU," Working Papers REM 2026/0402, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp04022026
    as

    Download full text from publisher

    File URL: https://rem.rc.iseg.ulisboa.pt/wps/pdf/REM_WP_0402_2026.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign 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:ise:remwps:wp04022026. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Sandra Araújo (email available below). General contact details of provider: https://rem.rc.iseg.ulisboa.pt/ .

    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.