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Determinants of Government Bond Spreads and Contagion between 2001–2014

Author

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  • Kristóf Gyódi

    (Faculty of Economic Sciences, University of Warsaw)

Abstract

This paper analyses the pricing of sovereign risk and contagion during the crises in the Central and Eastern European countries. Panel data are used to estimate the determinants of government bond spreads in three different time periods: before the crisis, during the global financial crisis, and during the European debt crisis. The econometric model includes interactions between the explanatory variables and the crisis dummies. This specification enables the coefficients to change during the crises. The empirical analysis confirms a statistically significant relationship between sovereign risk and macroeconomic fundamental variables. Additionally, the results suggest an increase in the importance of macroeconomic fundamentals during the financial crisis. The analysis also supports that sovereign credit ratings and exchange rate risk have a significant impact on government bond spreads.

Suggested Citation

  • Kristóf Gyódi, 2017. "Determinants of Government Bond Spreads and Contagion between 2001–2014," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 67(2), pages 235-256, June.
    • Handle: RePEc:aka:aoecon:v:67:y:2017:i:2:p:235-256
    Note: The author wishes to thank Dr. Michał Brzozowski for his guidance, help, and comments, which were essential for this paper. The author would like to also express his gratitude to Prof. Dr. Hab. Jan Jakub Michałek and Dr. Jan Hagemejer for their suggestions and recommendations.
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    More about this item

    Keywords

    government bond spreads; sovereign risk; sovereign credit rating; contagion; Central and Eastern European countries;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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