How do experts forecast sovereign spreads?

Jacopo Cimadomo, Peter Claeys and Marcos Poplawski-Ribeiro

European Economic Review, 2016, vol. 87, issue C, 216-235

Abstract: This paper assesses how forecasting experts form their expectations about future government bond spreads. Using monthly survey forecasts for France, Italy and the United Kingdom between January 1993 and October 2014, we test whether respondents consider the expected evolution of the fiscal balance—and other economic fundamentals—to be significant drivers of the expected bond yield differential over a benchmark German 10-year bond. Our main result is that a projected improvement of the fiscal outlook significantly reduces expected sovereign spreads. This suggests that credible fiscal plans affect market experts’ expectations and reduce the pressure on sovereign bond markets. In addition, we show that expected fundamentals generally play a more important role in explaining forecasted spreads compared to realized spreads.

Keywords: Market expectations; Sovereign bond spreads; Survey data; Consensus Economics (search for similar items in EconPapers)
JEL-codes: E62 G10 H30 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292116300447
Full text for ScienceDirect subscribers only

Related works:
Working Paper: How do Experts Forecast Sovereign Spreads? (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:87:y:2016:i:c:p:216-235

DOI: 10.1016/j.euroecorev.2016.03.002

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().