IDEAS home Printed from https://ideas.repec.org/p/ecl/stabus/3976.html
   My bibliography  Save this paper

Bond Convenience Yields in the Eurozone Currency Union

Author

Listed:
  • Jiang, Zhengyang

    (Northwestern Kellogg)

  • Lustig, Hanno

    (Stanford GSB, NBER, SIEPR)

  • Van Nieuwerburgh, Stijn

    (Columbia Business School, NBER, CEPR)

  • Xiaolan, Mindy Z.

    (UT Austin McCombs)

Abstract

This paper analyzes bond convenience yields in a currency union. The intertemporal government budget constraint requires member countries’ bond convenience yields and default spreads to adjust in response to shocks to their government surpluses. In the data, adjustments to convenience yields explain a larger fraction of the variation in Eurozone bond yields than default spreads. Higher convenience yields are correlated with stronger fiscal conditions both in the cross-section and in the time series. These findings imply large fiscal costs especially on the peripheral countries. If all Eurozone countries could have issued sovereign bonds at the same convenience yields as Germany, they would have raised an extra 281 billion euros in cumulative revenues from bond issuance between 2003 and 2020, representing 2.6% of 2020 Eurozone GDP.

Suggested Citation

  • Jiang, Zhengyang & Lustig, Hanno & Van Nieuwerburgh, Stijn & Xiaolan, Mindy Z., 2021. "Bond Convenience Yields in the Eurozone Currency Union," Research Papers 3976, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3976
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3797321
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gilchrist, Simon & Wei, Bin & Yue, Vivian Z. & Zakrajšek, Egon, 2022. "Sovereign risk and financial risk," Journal of International Economics, Elsevier, vol. 136(C).
    2. Christian Bittner & Diana Bonfim & Florian Heider & Farzad Saidi & Glenn Schepens & Carla Soares, 2022. "The Augmented Bank Balance-Sheet Channel of Monetary Policy," ECONtribute Discussion Papers Series 149, University of Bonn and University of Cologne, Germany.
    3. Ricardo Reis, 2022. "Debt Revenue and the Sustainability of Public Debt," Journal of Economic Perspectives, American Economic Association, vol. 36(4), pages 103-124, Fall.
    4. Corradin, Stefano & Schwaab, Bernd, 2023. "Euro area sovereign bond risk premia before and during the Covid-19 pandemic," European Economic Review, Elsevier, vol. 153(C).
    5. Corradin, Stefano & Grimm, Niklas & Schwaab, Bernd, 2021. "Euro area sovereign bond risk premia during the Covid-19 pandemic," Working Paper Series 2561, European Central Bank.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:stabus:3976. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/gsstaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.