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Recent estimates of sovereign risk premia for euro-area countries

Author

Listed:
  • Antonio Di Cesare

    (Bank of Italy)

  • Giuseppe Grande

    (Bank of Italy)

  • Michele Manna

    (Bank of Italy)

  • Marco Taboga

    (Bank of Italy)

Abstract

This paper examines the recent behavior of sovereign interest rates in the euro area, focusing on the 10 year yield spreads relative to Germany for Italy and other euro area countries. Both previous analyses and the new evidence presented in the paper suggest that, in recent months, for several countries the spread has increased to levels that are well above those that could be justified on the basis of fiscal and macroeconomic fundamentals. Among the possible reasons for this gap, the analysis focuses on the perceived risk of a break up of the euro area.

Suggested Citation

  • Antonio Di Cesare & Giuseppe Grande & Michele Manna & Marco Taboga, 2012. "Recent estimates of sovereign risk premia for euro-area countries," Questioni di Economia e Finanza (Occasional Papers) 128, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_128_12
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2012-0128/QEF_128.pdf
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    References listed on IDEAS

    as
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    2. Aizenman, Joshua & Hutchison, Michael & Jinjarak, Yothin, 2013. "What is the risk of European sovereign debt defaults? Fiscal space, CDS spreads and market pricing of risk," Journal of International Money and Finance, Elsevier, vol. 34(C), pages 37-59.
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    4. Ardagna Silvia & Caselli Francesco & Lane Timothy, 2007. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-35, August.
    5. Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2012. "Sovereign risk premiums in the European government bond market," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 975-995.
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    14. repec:lic:licosd:30412 is not listed on IDEAS
    15. Metiu, Norbert, 2012. "Sovereign risk contagion in the Eurozone," Economics Letters, Elsevier, vol. 117(1), pages 35-38.
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    More about this item

    Keywords

    interest rates; government yield spreads; sovereign risk premia; government debt; financial crisis; sovereign debt crisis; financial contagion; euro break up; convertibility risk;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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