Heppke-Falk, Kirsten H.; Wolff, Guntram B. - Deutsche Bundesbank - 2007
We identify investor moral hazard in the German fiscal federation. Our identification strategy is based on a variable … markets' bail-out expectations. In sum, our results indicate significant investor moral hazard in the sub-national German bond … (Länder) to a bail-out, the interest payments-to-revenue ratio. While risk premia measured in the German sub-national bond …