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Interest premium and external position: a time varying approach

István Kónya () and Franklin Maduko
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Franklin Maduko: Central European University, Economics Department

No 1829, IEHAS Discussion Papers from Institute of Economics, Centre for Economic and Regional Studies

Abstract: The paper reexamines the empirical relationship between external indebtedness and the interest premium on government bonds. We use a broad sample of countries between 1980-2017 that includes advanced, emerging and less-developed economies. We show that the relationship is strongly state-dependent, and it varies both with the international financial climate, and with the level of development. Moreover, while we find some evidence for non-linearity, this is mostly driven by turbulent periods. We carry out a number of robustness exercises, which highlight issues related to sample composition, the choice of the debt measure, and the definition of crisis events.

Keywords: interest premium; net foreign assets; estimation; country panel; state dependence (search for similar items in EconPapers)
JEL-codes: F34 F41 E43 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2018-11
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