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The Crime of Fiscal Neglect and Punishment of High Rates – A Panel Study for EMU

Ahlqvist, Victor LU (2016) NEKN01 20161
Department of Economics
Abstract (Swedish)
This paper examines long-term interest rates and fiscal liabilities within EMU in the
context of the recent sovereign debt crisis; where Greece, Ireland, Italy, Portugal and
Spain faced rising interest rates in contrast to the rest of the EMU. An assessment of the
short and long-run properties of long rates, fiscal deficits and government debt are
estimated for 11 EMU countries in the time span 1999-2015. This is done through
different fixed-effects models, 2SLS and Panel-DOLS. No long-run relationship between
the variables is found. Results also show that fiscal deficits have a positive effect on long
rates and the interaction between deficits and debt enhance the overall impact on rates,
in particular to fiscally vulnerable... (More)
This paper examines long-term interest rates and fiscal liabilities within EMU in the
context of the recent sovereign debt crisis; where Greece, Ireland, Italy, Portugal and
Spain faced rising interest rates in contrast to the rest of the EMU. An assessment of the
short and long-run properties of long rates, fiscal deficits and government debt are
estimated for 11 EMU countries in the time span 1999-2015. This is done through
different fixed-effects models, 2SLS and Panel-DOLS. No long-run relationship between
the variables is found. Results also show that fiscal deficits have a positive effect on long
rates and the interaction between deficits and debt enhance the overall impact on rates,
in particular to fiscally vulnerable countries. Unexpectedly, government debt show a
negative effect on interests, a result explained in the context of ECB’s role as lender of
last resort and the asymmetric effects among EMU members. In conclusion, results
suggest a subjective punishment for fiscal inadequacy through long-term rates. (Less)
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author
Ahlqvist, Victor LU
supervisor
organization
course
NEKN01 20161
year
type
H1 - Master's Degree (One Year)
subject
keywords
EMU, Long-term Interest Rates, Government Debt, Fiscal Deficits, GIIPS
language
English
id
8895030
date added to LUP
2017-01-19 15:41:07
date last changed
2017-01-19 15:41:07
@misc{8895030,
  abstract     = {This paper examines long-term interest rates and fiscal liabilities within EMU in the
context of the recent sovereign debt crisis; where Greece, Ireland, Italy, Portugal and
Spain faced rising interest rates in contrast to the rest of the EMU. An assessment of the
short and long-run properties of long rates, fiscal deficits and government debt are
estimated for 11 EMU countries in the time span 1999-2015. This is done through
different fixed-effects models, 2SLS and Panel-DOLS. No long-run relationship between
the variables is found. Results also show that fiscal deficits have a positive effect on long
rates and the interaction between deficits and debt enhance the overall impact on rates,
in particular to fiscally vulnerable countries. Unexpectedly, government debt show a
negative effect on interests, a result explained in the context of ECB’s role as lender of
last resort and the asymmetric effects among EMU members. In conclusion, results
suggest a subjective punishment for fiscal inadequacy through long-term rates.},
  author       = {Ahlqvist, Victor},
  keyword      = {EMU,Long-term Interest Rates,Government Debt,Fiscal Deficits,GIIPS},
  language     = {eng},
  note         = {Student Paper},
  title        = {The Crime of Fiscal Neglect and Punishment of High Rates – A Panel Study for EMU},
  year         = {2016},
}