Government Debt Issuance in the Euro Area: The Impact of the Financial Crisis

Publication Date:

January 1, 2011

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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 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.

Series:

Working Paper No. 2011/021

Subject:

Currencies Financial crises Industrial production Inflation Money Prices Production Public debt

English

Publication Date:

January 1, 2011

ISBN/ISSN:

9781455211944/1018-5941

Stock No:

WPIEA2011021

Pages:

29

Please address any questions about this title to publications@imf.org