An Update on EMU Sovereign Yield Spread Drivers in Times of Crisis: A Panel Data Analysis



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Gómez-Puig, Marta and Sosvilla-Rivero, Simón and Ramos-Herrera, María del Carmen (2014) An Update on EMU Sovereign Yield Spread Drivers in Times of Crisis: A Panel Data Analysis. The North American Journal of Economics and Finance, 30 . pp. 133-153. ISSN 1062-9408

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We empirically investigate the determinants of EMU sovereign bond yield spreads with respect to the German bund. Using panel data techniques, we examine the role of a wide set of potential drivers. To our knowledge, this paper presents one of the most exhaustive compilations of the variables used in the literature to study the behaviour of sovereign yield spreads and, in particular, to gauge the effect on these spreads of changes in market sentiment and risk aversion. We use a sample of both central and peripheral countries from January 1999 to December 2012 and assess whether there were significant changes after the outbreak of the euro area debt crisis. Our results suggest that the rise in sovereign risk in central countries can only be partially explained by the evolution of local macroeconomic variables in those countries. Besides, without exception, the marginal effects of sovereign spread drivers (specifically, the variables that measure global market sentiment) increased during the crisis compared to the pre-crisis period, especially in peripheral countries.

Item Type:Article
Uncontrolled Keywords:Sovereign bond spreads; Panel data; Eurozonea
Subjects:Social sciences > Economics > Depressions
Social sciences > Economics > Econometrics
Social sciences > Economics > World economy
Social sciences > Economics > Public economy
JEL:C33, C52, E44, F36, G15
ID Code:30629
Deposited On:07 Oct 2015 12:05
Last Modified:19 Dec 2018 09:59

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