We use a panel of euro area countries to assess the determinants of long-term sovereign bond yield spreads over the period 1999.01-2010.12. We find that, on top of the fundamentals themselves, changes in the sensitivity of bond prices to fundamentals are also necessary to explain yields over the...

In this paper we study the determinants of sovereign debt credit ratings using rating notations from the three main international rating agencies, for the period 1995-2005. We employ panel estimation and random effects ordered probit approaches to assess the explanatory power of several...

We analyse the interactions between public and private sector wages per employee in OECD countries. We motivate the analysis with a dynamic labour market equilibrium model with search and matching frictions to study the effects of public sector employment and wages on the labour market,...

We use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard & Poor’s, Moody’s, Fitch). Our results show: significant responses of government bond yield...

The reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor’s, Moody’s, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are filtered using EGARCH specifications. The...

The reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor's, Moody's, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are filtered using EGARCH specifications. The estimation...

We study fiscal consolidations in the Central and Eastern European countries and what determines the probability of their success. We define consolidation events as substantive improvements in fiscal balances adjusting for the impact of cyclical effects. We use Logit models for the period...

The government’s choices of the corporate tax rate and public investment are interdependent. In particular, they both respond positively to the other. Therefore, international tax competition not only drives corporate tax rates to lower levels but might also affect negatively the stock of...

This paper presents a survey of methods for assessing fiscal soundness, i.e. the capability of governments to honour their obligations in the short run and in the long run. The need for a comprehensive monitoring of fiscal soundness derives from the risks to economic stability that arise from...

This paper aims to address the issue of public pension reforms under demographic ageing that is likely to occur in Europe over the next 50 years. Three possible scenarios are analysed in a Blanchard OLG framework. These include: i) a decrease both in public pensions and the lump sum labour...