Risk premium as an economic policy objective: The Spanish case

Indalecio Perez, Pablo Castellanos and José Sánchez-Santos ()

Economics and Business Letters, 2013, vol. 2, issue 3, 94-104

Abstract: This paper tries to analyse to what extent the Spanish public debt risk premium is related with the Spanish economic fundamentals. A cointegration analysis of different economic variables (public or private debt/GDP, inflation, unemployment and borrowing capacity) from 1990 to 2012 does not allow us to confirm strongly the long term relationship between the risk premium and the referred variables. There is not enough evidence to show that premium risk is determined by Spanish economic fundamentals in the long term. Therefore, the referred spread role as an economic policy objective should be relativized since it cannot be proved that tackling the analysed economic variables could reduce the spread significantly.

Date: 2013
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