High Yields: The Spread on German Interest Rates
Carlo A. Favero
Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)
Bocconi University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
University of Rome
The Economic Journal, Vol. 107, Issue 443, pp. 956-985, 1997
This paper is a first attempt at evaluating the determinants of the interest rate differentials on government bonds between high yielders, namely Italy, Spain and Sweden, and Germany. In particular we concentrate on daily frequencies, where the relevance of economic fundamentals is rather limited, and address the question of the relative importance of local and global factors in the determination of such spread. We identify and measure three components of total yield differentials: one due to expectations of exchange rate depreciation – which we call the exchange rate factor – another which reflects the market assessment of default risk and a last one due to the different taxation treatment of long‐term yields.
Number of Pages in PDF File: 30Accepted Paper Series
Date posted: January 28, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo2 in 0.609 seconds