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Fiscal Positions and Government Bond Yields in OECD Countries
Author(s) -
GRUBER JOSEPH W.,
KAMIN STEVEN B.
Publication year - 2012
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2012.00544.x
Subject(s) - bond , economics , fiscal policy , government bond , debt , monetary economics , business cycle , basis point , fiscal union , macroeconomics , finance
We examine the effect of fiscal positions, both the level of debt and the fiscal balance, on long‐term government bond yields in the Organisation for Economic Co‐operation and Development (OECD). To control for the endogenity of fiscal positions to the business cycle we utilize forward projections of fiscal positions from the OECD's Economic Outlook. In a panel regression over the period from 1988 to 2007, we find a robust and significant effect of fiscal positions on long‐term bond yields. Our estimates imply that the marginal effect of the projected deterioration of fiscal positions adds about 60 basis points to U.S. bond yields by 2015, with effects on other G‐7 bond yields generally being smaller.