Fiscal Positions and Government Bond Yields in OECD Countries

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DIANE Publishing, Apr 1, 2011 - 40 pages
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Examines the impact of fiscal positions, both the level of debt and the fiscal balance, on long-term gov't. bond yields in the Org. for Econ. Cooperation and Development (OECD). In order to control for the endogenity of fiscal positions to the business cycle. the authors utilize forward projections of fiscal positions from the OECD's Economic Outlook. In a panel regression over the period from 1988 to 2007, they find a robust and significant effect of fiscal performance on long-term bond yields. The marginal effect of the projected deterioration of fiscal positions associated with the recent financial crisis is to add about 60 basis points to U.S. bond yields by 2015, with effects on other G7 bond yields generally being smaller. Illus. This is a print on demand report.
 

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