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Economic volatility and sovereign yields’ determinants: a time-varying approach
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Autores
Orientador(es)
Resumo(s)
Using monthly data for 10 euro area countries between 1999:01 and 2015:12, we take
a new three-step methodological approach: first, we inspect the key determinants of
10-year government bond yield spreads; second, we compute country-specific timevarying
coefficient models of spreads’ determinants; third, we use these estimates as
explanatory variables in panel regressions using output volatility as the dependent
variable.We find that better fiscal positions or higher-than-expected economic growth
prospects reduce the yield spreads,while increases in theVIX, bid-ask spread, debt-to-
GDP ratio or real effective exchange rate appreciation increase the spreads.Moreover,
the responsiveness of the yield spread determinants increased in the run-up to the global
financial crisis. Finally, for the case of the budget balance and real growth (bid-ask
spread, debt-to-GDP ratio, real effective exchange rate and VIX), the larger (higher)
in absolute value the corresponding spread’s responsiveness, the lower (higher) the
economic volatility.
Descrição
Palavras-chave
Volatility Fiscal Policy Bond Spreads Errors-in-Variables Time-Varying Coefficients Instrumental Variables Cross-Sectional Dependence
Contexto Educativo
Citação
Afonso, António and João Tovar Jalles. (2020)."Economic volatility and sovereign yields’ determinants: a time-varying approach". Empirical Economics, Vol. 58, No.2: pp. 427-451.
Editora
Springer