Sovereign spreads can be broken up into two components: the expected loss from default and the risk premium, with the latter reflecting how investors price the risk of unexpected losses. We show that the risk premium is often the larger part of the spread

In this paper, I investigate to what extent the cross-country variation in nominal interest rates can be explained as being due to governments' optimal response to economic conditions such as tax collection costs, tax evasion and government consumption needs. In particular, I study the effects...