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The term structure of sovereign default risk in EMU member countries and its determinants

Stefan Eichler and Dominik Maltritz

Journal of Banking & Finance, 2013, vol. 37, issue 6, 1810-1816

Abstract: We analyze the determinants of sovereign default risk of EMU member states using government bond yield spreads as risk indicators. We focus on default risk for different time spans indicated by spreads for different maturities. Using a panel framework we analyze whether there are different drivers of default risk for different maturities. We find that lower economic growth and larger openness increase default risk for all maturities. Higher indebtedness only increases short-term risk, whereas net lending, trade balance and interest rate costs only drive long-term default risk.

Keywords: Sovereign default risk; Term structure; EMU; Yield spreads (search for similar items in EconPapers)
JEL-codes: F34 G15 F37 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:eee:jbfina:v:37:y:2013:i:6:p:1810-1816