Long-Run and Short-Run Determinants of Sovereign Bond Yields in Advanced Economies
IMF Working Papers, November 8, 2012
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Bibliographic details
- Authors: Tigran Poghosyan
- Published: November 8, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475529142.001
Summary of study
- Analysis period: 1980-2010.
- Sample: 22 advanced economies.
- Methodology: panel cointegration techniques to distinguish long-run and short-run determinants of sovereign borrowing costs.
- Paper metadata:
- Pages: 26
- Volume: 2012
- Issue: 271
- Series: Working Paper No. 2012/271
- DOI: https://doi.org/10.5089/9781475529142.001
- Stock No: WPIEA2012271
- ISBN: 9781475529142
- ISSN: 1018-5941
Long-run determinants (empirical findings)
- Government debt-to-GDP ratio:
- Government bond yields increase by about 2 basis points in response to a 1 percentage point increase in government debt-to-GDP ratio.
- Potential growth rate:
- Government bond yields increase by about 45 basis points in response to a 1 percentage point increase in potential growth rate.
Short-run determinants and dynamics
- Short-run factors cited include inflation and short-term interest rates (among others).
- Adjustment dynamics:
- Sovereign bond yields deviate from the level determined by long-run fundamentals in the short run.
- About half of the deviation adjusts in one year.
Impact of the global financial crisis (euro area focus)
- Estimation results for euro area countries:
- Spreads against Germany in some European periphery countries exceeded the level determined by fundamentals in the aftermath of the crisis.
- Some North European countries benefited from “safe haven” flows, implying spreads below levels implied by fundamentals.
Subject tags and keywords (as provided)
- Subject: Bond yields, Financial institutions, Financial services, Fiscal policy, Fiscal stance, Public debt, Sovereign bonds, Yield curve
- Keywords: bond yield, Bond yields, debt ratio, Fiscal stance, Global, government bond bond yield, Government bond yields, inflation, long-run and short-run determinants, panel cointegration, real bond yields, sovereign bond bond yield, sovereign bond yield, Sovereign bonds, WP, Yield curve
Long-Run and Short-Run Determinants of Sovereign Bond Yields in Advanced Economies, Tigran Poghosyan, IMF Working Papers 2012, 271 (2012), DOI: https://doi.org/10.5089/9781475529142.001