Government Debt Issuance in the Euro Area: The Impact of the Financial Crisis
January 1, 2011
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Summary
This paper documents and analyzes crisis-related changes in government debt issuance practices in the 16 euro zone countries and Denmark. Using a newly constructed database on primary market debt issuance during 2007-09, we find evidence of a shift away from pre-crisis standards of best funding practices competitive auctions of debt instruments with a fixed coupon, long maturity and local currency denomination (DLTF). Exploiting the cross-country panel data dimension of the data, we conclude that the crisis and related changes in the macroeconomic environment and investor sentiment can account for a significant proportion of the deviation. The negative effect of the crisis on DLTF debt issuance was especially pronounced in high deficit and high debt euro area countries, and has forced governments to assume additional risk.
Subject: Currencies, Financial crises, Industrial production, Inflation, Money, Prices, Production, Public debt
Keywords: Currencies, debt, debt issuance, debt stock, debt variable, deficit, DLTF debt, fiscal policy, foreign currency, Global, Industrial production, Inflation, investor, sovereign debt, sovereign debt management, WP, yield
Pages:
29
Volume:
2011
DOI:
Issue:
021
Series:
Working Paper No. 2011/021
Stock No:
WPIEA2011021
ISBN:
9781455211944
ISSN:
1018-5941
