This study analyses whether expected budget deficits have an impact on interest rate swap spreads in France, Germany and Italy. We use monthly deficit forecasts from financial market participants to take the forward-looking behaviour of financial markets into account. Results of a SUR estimation...

We investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest spreads contained in bond yields of the countries now belonging to the Eurozone. Deficits significantly increase risk premia measured by relative swap...

We study the determinants of sovereign bond spreads in the euro area since the introduction of the euro. We show that an aggregate risk factor is a main driver of spreads. This factor also plays an important indirect role for risk spreads through its interaction with the size and structure of...

We document that during the Global Recession, US monetary policy easings triggered the "exorbitant duty" of the United States, the issuer of the world's dominant currency, by causing a dollar appreciation and a transfer of wealth from the United States to the rest of the world. This dollar...

What drives the strong reaction of financial markets to central bank communication on the days of policy decisions? We highlight the role of two factors that we identify from highfrequency monetary surprises: news on future macroeconomic conditions (Delphic shocks) and news on future monetary...

We examine forward guidance (with known and uncertain duration) in a New Keynesian model for an advanced small open economy, showing that the response of the economy to this policy depends, both quantitatively and qualitatively, on some structural features through calibrations for Sweden and...

After a long period of loose monetary policy triggered by the Great Recession, some central banks are signaling that they will raise their policy rates soon. Previous research, for example, Bernanke and Kuttner (2005) and Ozdagli (2014), has shown that asset prices react more strongly to...