What Drives Provincial-Canada Yield Spreads?

25 Pages Posted: 20 Jul 2007

See all articles by Laurence David Booth

Laurence David Booth

University of Toronto - Rotman School of Management

George Georgopoulos

York University - Atkinson School of Administrative Studies

Walid Hejazi

University of Toronto - Rotman School of Management

Abstract

Although recent research has led to a deeper understanding of the factors determining yields on long-term Canada bonds, there has been little corresponding work on provincial bonds. By using a carefully constructed new data set, we establish two important results. First, provincial fiscal positions (debt and deficits) are an important factor in determining yield spreads between provincial and Canada bonds. Second, we show that provincial bonds are a substitute for corporate debt, in that during recessionary 'flights to quality' their yields react like those on corporate bonds.

Suggested Citation

Booth, Laurence David and Georgopoulos, George and Hejazi, Walid, What Drives Provincial-Canada Yield Spreads?. Canadian Journal of Economics, Vol. 40, No. 3, pp. 1008-1032, August 2007. Available at SSRN: https://ssrn.com/abstract=1001801 or http://dx.doi.org/10.1111/j.1365-2966.2007.00440.x

Laurence David Booth

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

George Georgopoulos

York University - Atkinson School of Administrative Studies ( email )

Toronto, Ontario M3J 1P3
Canada

Walid Hejazi (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
(416) 287-7318 (Phone)

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