The pricing of G7 sovereign bond spreads – The times, they are a-changin

D’Agostino, Antonello and Michael Ehrmann
Authors registered in the RePEc Author Service: Antonello D'Agostino

Journal of Banking & Finance, 2014, vol. 47, issue C, 155-176

Abstract: Against the background of the current debate about fiscal sustainability in several advanced economies, this paper estimates determinants of G7 sovereign bond spreads, using high-frequency proxies for market expectations about macroeconomic fundamentals and allowing for time-varying parameters. The paper finds substantial asymmetry in the importance of country fundamentals and considerable time variations in the pricing of risks. There has been a reduced pricing of several risk factors in the years preceding the financial crisis, and either an over-pricing of risk or the pricing of a re-denomination risk of euro area bonds during the European sovereign debt crisis, a pattern that does not apply to the non-euro area G7 bonds.

Keywords: Sovereign spreads; Fiscal policy; Time-varying coefficients (search for similar items in EconPapers)
JEL-codes: E43 E44 F34 G15 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

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Related works:
Working Paper: The pricing of G7 sovereign bond spreads: the times, they are a-changin (2013)
Working Paper: The pricing of G7 sovereign bond spreads – the times, they are a-changin (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:47:y:2014:i:c:p:155-176

DOI: 10.1016/j.jbankfin.2014.06.001

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