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    Fiscal policy and the term premium in real interest rate differentials

    Flavin, Thomas and Limosani, M.G. (2000) Fiscal policy and the term premium in real interest rate differentials. Applied Financial Economics, 10 (4). pp. 413-417. ISSN 0960-3107

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    The paper seeks to identify the source of the risk premium in real interest rate differentials across European countries. In particular, the link between real interest rate differentials existing between various European countries and Germany, and domestic fiscal policy as proxied by the Debt/GDP ratios in these countries is examined. Results provide strong evidence that this variable exerts a significant influence on the determination of both the level and the volatility of the differential for both long-term and short-term interest rates. This is a noteworthy result bearing in mind the Maastricht criteria for European Monetary Union and the importance attached to convergence of Debt/GDP ratios.

    Item Type: Article
    Keywords: Fiscal policy; term premium; real interest rate differentials;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 8002
    Identification Number:
    Depositing User: Thomas Flavin
    Date Deposited: 07 Mar 2017 17:26
    Journal or Publication Title: Applied Financial Economics
    Publisher: Taylor & Francis (Routledge)
    Refereed: Yes
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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