Seminar Empirical Public Economics
Public debt and the financial crisis: What drives government bond yields?
Prof. Dr. Johannes Becker, Markos Jung, Hauke VierkeBrief description
The recent financial crisis has led to a significant increase in interest rates on government bonds, especially for highly indebted countries such as Greece. In sharp contrast, Germany could temporarily borrow from creditors for negative interest rates. Thus, yield spreads within the European Monetary Union have risen substantially. Public debate often links high interest rates to unsound fiscal policy. An attempt to investigate the sustainability of fiscal policy is to analyze whether public spending and revenues meet the intertemporal budget constraint. However, it remains disputed how much interest rate movements on public debts can be explained by default risk and/or liquidity risk factors. In addition, there is evidence for a change in the creditor’s behavior over time.
In this seminar, participants will study up-to-date and relevant research papers, which address the above questions in empirical analysis. The course will be held in English.
Topics
Codogno, L.; Favero, C.; Missale, A. (2003): Yield spreads on EMU government bonds. In: Economic Policy 18 (37), S. 503.
Alesina, A.; Broeck, M. de; Prati Musetti, A.; Tabellini, G. E. (1992): Default risk on government debt in OECD countries. In: Economic Policy 7 (15), S. 427–463.
Favero, C. (2010): How does liquidity affect government bond yields? In: Journal of Financial and Quantitative Analysis 45 (01), S. 107
Beber, A; Brandt, M. W.; Kavajecz, K. A. (2009): Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market. In: Review of Financial Studies 22 (3), S. 925–957.
Hilscher, J. (2010): Determinants of Sovereign Risk: Macroeconomic Fundamentals and the Pricing of Sovereign Debt. In: Review of Finance 14 (2), S. 235.
Hagen, J. von (2011): Government bond risk premiums in the EU revisited: The Impact of the financial crisis. In: European Journal of Political Economy 27 (1), S. 36.
Schuknecht, L. (2009): Government risk premiums in the bond market: EMU and Canada. In: European Journal of Political Economy 25 (3), S. 371
- The seminar takes place on June 15, 2012 (full day).
- Application until April 15, 2012. Please contact G. Musiolik, Tel. 0251-8322871 (12gamu@wiwi.uni-muenster.de).
- All students are required to write a seminar paper (15 pages) and give a presentation. Active participation is expected.
- Papers due on June 1, 2012, 12h.
- Language (papers and seminar discussions): English.
Guidelines for term papers
Guidelines for seminar presentations
