Fiscal Policy Events and Interest Rate Swap Spreads: Evidence from the EU

Posted: 11 Jun 2007

See all articles by Antonio Afonso

Antonio Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics)

Rolf Strauch

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Abstract

This paper assesses the importance given in capital markets to the credibility of the European fiscal framework. We evaluate to which extent relevant fiscal policy events taking place in 2002 produced a reaction in the long-term bond segment of the capital markets. Firstly, we identify the fiscal policy events and qualitatively assess the views of capital market participants. Secondly, we estimate the impact of these fiscal events on the interest rate swap spreads, which is our measure for risk premium. According to our results the reaction of swap spreads, when significant, have been mostly around five basis points or less.

Keywords: fiscal policy events, Stability and Growth Pact, interest rate swap spreads

JEL Classification: C22, G15, H30

Suggested Citation

Afonso, Antonio and Strauch, Rolf, Fiscal Policy Events and Interest Rate Swap Spreads: Evidence from the EU. Journal of International Financial Markets, Institutions and Money, Vol. 17, No. 3, pp. 261-276, 2007. Available at SSRN: https://ssrn.com/abstract=701124

Antonio Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://https://www.iseg.ulisboa.pt/aquila/homepage/aafonso

UECE (Research Unit on Complexity and Economics)

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://https://uece.rc.iseg.ulisboa.pt/

Rolf Strauch

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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