The Risk Premiumon Italian Government Debt, 1976-1988

Author/Editor:

Carlo Cottarelli ; Mauro Mecagni

Publication Date:

April 1, 1990

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper considers the behavior of the yield differential between government and nongovernment bonds in Italy between 1976 and 1988. It is shown that the trend increase of the differential observed in this period was significantly influenced by the deterioration of public finances, as reflected both by an increase in the relative supply of government with respect to nongovernment paper and by a worsening of selected default risk indicators. In addition, the effect of relative supply factors was found to be statistically more robust and quantitatively more important than the effect of risk indicators in explaining the movements of the yield differential.

Series:

Working Paper No. 1990/038

Subject:

Banking Bonds Debt default External debt Financial institutions National accounts Public debt Return on investment Sovereign bonds

English

Publication Date:

April 1, 1990

ISBN/ISSN:

9781451977516/1018-5941

Stock No:

WPIEA0381990

Pages:

42

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