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https://doi.org/10.15179/ces.19.1.2

The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model

Petra Palić ; The Institute of Economics, Zagreb, Croatia
Petra Posedel Šimović   ORCID icon orcid.org/0000-0002-4447-1643 ; Zagreb School of Economics and Management, Zagreb, Croatia
Maruška Vizek ; The Institute of Economics, Zagreb, Croatia

Puni tekst: engleski, pdf (658 KB) str. 37-66 preuzimanja: 772* citiraj
APA 6th Edition
Palić, P., Posedel Šimović, P. i Vizek, M. (2017). The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model. Croatian Economic Survey, 19 (1), 37-66. https://doi.org/10.15179/ces.19.1.2
MLA 8th Edition
Palić, Petra, et al. "The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model." Croatian Economic Survey, vol. 19, br. 1, 2017, str. 37-66. https://doi.org/10.15179/ces.19.1.2. Citirano 07.12.2019.
Chicago 17th Edition
Palić, Petra, Petra Posedel Šimović i Maruška Vizek. "The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model." Croatian Economic Survey 19, br. 1 (2017): 37-66. https://doi.org/10.15179/ces.19.1.2
Harvard
Palić, P., Posedel Šimović, P., i Vizek, M. (2017). 'The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model', Croatian Economic Survey, 19(1), str. 37-66. https://doi.org/10.15179/ces.19.1.2
Vancouver
Palić P, Posedel Šimović P, Vizek M. The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model. Croatian Economic Survey [Internet]. 2017 [pristupljeno 07.12.2019.];19(1):37-66. https://doi.org/10.15179/ces.19.1.2
IEEE
P. Palić, P. Posedel Šimović i M. Vizek, "The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model", Croatian Economic Survey, vol.19, br. 1, str. 37-66, 2017. [Online]. https://doi.org/10.15179/ces.19.1.2

Sažetak
We use data for 24 European countries, spanning from 1994 to 2015, in order to examine how changes in macroeconomic conditions influence country risk premium volatility proxied by sovereign spreads variance. In the first part of the empirical analysis, we estimate the univariate generalized autoregressive conditional heteroskedasticity (GARCH) model in order to obtain the conditional variance of sovereign bond spreads. We show that an increase in this variance coincides with economic and financial crisis occurring either in the country or globally. In the second part of the empirical analysis, we estimate the panel vector autoregression (panel VAR) model in order to model the interplay between macroeconomic fundamentals (inflation, output gap, public debt and interest rates) and the country’s risk premium volatility. We show that overheating of the economy, along with an unexpected increase in public debt, inflation and interest rates, increase the country’s risk premium volatility. We also show that a sudden increase in the country´s risk premium volatility depresses the economy, exerts deflationary pressures on consumer prices, and is followed by a strong and permanent increase in public debt.

Ključne riječi
sovereign bond markets; panel VAR; European Union

Projekti
HRZZ / UIP / UIP-2013-11-1356 / SOBOM - Ekonomski, statistički i politički aspekti tržišta državnih obveznica

Hrčak ID: 184543

URI
https://hrcak.srce.hr/184543

Posjeta: 1.119 *