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...

This paper examines the implications of changing the expectations assumption that is embedded in nearly all current macroeconomic models. The paper substitutes measured or real expectations for rational expectations in an array of standard macroeconomic relationships, as well as in a DSGE model....

This paper examines the expectations behavior of individual responses in the Survey of Professional Forecasters, the University of Michigan's Survey Research Center survey of consumers, and the ECB Survey of Professional Forecasters. It finds that the most robust feature of all of these...

This paper examines the expectations behavior of individual responses in the surveys of the Survey of Professional Forecasters and the University of Michigan's Survey Research Center. The paper finds that respondents consistently revise their forecasts of inflation, unemployment, and other key...

This paper discusses the likely evolution of U.S. inflation in the near and medium term on the basis of (1) past U.S. experience with very low levels of inflation, (2) the most recent Japanese experience with deflation, and (3) recent U.S. micro evidence on downward nominal wage rigidity. Our...