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The maturity of sovereign debt issuance in the euro area()
We use information on new sovereign debt issues in the euro area to explore the drivers behind the debt maturity decisions of governments. We set up a theoretical model for the maturity structure that trades off the preference for liquidity services provided by short-term debt, roll-over risk and pr...
Autores principales: | , , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
The Authors. Published by Elsevier Ltd.
2021
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7521257/ https://www.ncbi.nlm.nih.gov/pubmed/33012939 http://dx.doi.org/10.1016/j.jimonfin.2020.102293 |
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author | Beetsma, Roel Giuliodori, Massimo Hanson, Jesper de Jong, Frank |
author_facet | Beetsma, Roel Giuliodori, Massimo Hanson, Jesper de Jong, Frank |
author_sort | Beetsma, Roel |
collection | PubMed |
description | We use information on new sovereign debt issues in the euro area to explore the drivers behind the debt maturity decisions of governments. We set up a theoretical model for the maturity structure that trades off the preference for liquidity services provided by short-term debt, roll-over risk and price risk. The average debt maturity is negatively related to both the level and the slope of the yield curve. A panel VAR analysis shows that positive shocks to risk aversion, the probability of non-repayment and the demand for the liquidity services of short-term debt all have a positive effect on the yield curve level and slope, and a negative effect on the average maturity of new debt issues. These results are partially in line with our theoretical framework. A forecast error variance decomposition suggests that changes in the probability of non-repayment as captured by the expected default frequency extracted from credit default spreads are the most important source of shocks. |
format | Online Article Text |
id | pubmed-7521257 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2021 |
publisher | The Authors. Published by Elsevier Ltd. |
record_format | MEDLINE/PubMed |
spelling | pubmed-75212572020-09-29 The maturity of sovereign debt issuance in the euro area() Beetsma, Roel Giuliodori, Massimo Hanson, Jesper de Jong, Frank J Int Money Finance Article We use information on new sovereign debt issues in the euro area to explore the drivers behind the debt maturity decisions of governments. We set up a theoretical model for the maturity structure that trades off the preference for liquidity services provided by short-term debt, roll-over risk and price risk. The average debt maturity is negatively related to both the level and the slope of the yield curve. A panel VAR analysis shows that positive shocks to risk aversion, the probability of non-repayment and the demand for the liquidity services of short-term debt all have a positive effect on the yield curve level and slope, and a negative effect on the average maturity of new debt issues. These results are partially in line with our theoretical framework. A forecast error variance decomposition suggests that changes in the probability of non-repayment as captured by the expected default frequency extracted from credit default spreads are the most important source of shocks. The Authors. Published by Elsevier Ltd. 2021-02 2020-09-28 /pmc/articles/PMC7521257/ /pubmed/33012939 http://dx.doi.org/10.1016/j.jimonfin.2020.102293 Text en © 2020 The Authors Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active. |
spellingShingle | Article Beetsma, Roel Giuliodori, Massimo Hanson, Jesper de Jong, Frank The maturity of sovereign debt issuance in the euro area() |
title | The maturity of sovereign debt issuance in the euro area() |
title_full | The maturity of sovereign debt issuance in the euro area() |
title_fullStr | The maturity of sovereign debt issuance in the euro area() |
title_full_unstemmed | The maturity of sovereign debt issuance in the euro area() |
title_short | The maturity of sovereign debt issuance in the euro area() |
title_sort | maturity of sovereign debt issuance in the euro area() |
topic | Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7521257/ https://www.ncbi.nlm.nih.gov/pubmed/33012939 http://dx.doi.org/10.1016/j.jimonfin.2020.102293 |
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