Bond Spreads and Economic Activity in Eight European Economies

35 Pages Posted: 7 Jan 2017

See all articles by Michael Bleaney

Michael Bleaney

University of Nottingham - School of Economics

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Veronica Veleanu

University of Surrey

Date Written: December 2016

Abstract

We provide new insights into the relationship between financial market tightness and real activity, using a new database of corporate bonds issued in eight European countries. Bond spreads have a significant negative relationship with four real activity variables at horizons 1–8 quarters ahead. The relationship is robust to adding measures of monetary policy tightness and leading indicators, providing strong support for models previously only evaluated on US data. A subset of northern European countries have similar sensitivity of real GDP to bond spreads, but others have greater sensitivity to bond spreads, revealing diverse responses in Europe to financial market tightness.

Suggested Citation

Bleaney, Michael and Mizen, Paul and Veleanu, Veronica, Bond Spreads and Economic Activity in Eight European Economies (December 2016). The Economic Journal, Vol. 126, Issue 598, pp. 2257-2291, 2016, Available at SSRN: https://ssrn.com/abstract=2895182 or http://dx.doi.org/10.1111/ecoj.12288

Michael Bleaney (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 0 115 951 5265 (Phone)
+44 0 115 951 5141 (Fax)

Paul Mizen

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5479 (Phone)
+44 115 951 4159 (Fax)

Bank of England

Threadneedle Street
London, EC2R 8AH
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Veronica Veleanu

University of Surrey

Guildford
Guildford, GU2 5XH
United Kingdom

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