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Scientific paper - Original scientific paper
The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model
Croatian Economic Survey, 19 (2017), 1; 37-66. https://doi.org/10.15179/ces.19.1.2
Palić, Petra; Posedel Šimović, Petra; Vizek, Maruška

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Palić, P., Posedel Šimović, P. & Vizek, M. (2017). The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model. Croatian Economic Survey, 19. (1), 37-66. doi: 10.15179/ces.19.1.2

Palić, Petra, et al. "The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model." Croatian Economic Survey, vol. 19, no. 1, 2017, pp. 37-66. https://doi.org/10.15179/ces.19.1.2

Palić, Petra, Petra Posedel Šimović and Maruška Vizek. "The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model." Croatian Economic Survey 19, no. 1 (2017): 37-66. https://doi.org/10.15179/ces.19.1.2

Palić, P., Posedel Šimović, P. and Vizek, M. (2017) 'The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model', Croatian Economic Survey, 19(1), pp. 37-66. doi: 10.15179/ces.19.1.2

Palić P, Posedel Šimović P, Vizek M. The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model. Croatian Economic Survey [Internet]. 2017 June 30 [cited 2024 April 18];19(1):37-66. doi: 10.15179/ces.19.1.2

P. Palić, P. Posedel Šimović and M. Vizek, "The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model", Croatian Economic Survey, vol. 19, no. 1, pp. 37-66, June 2017. [Online]. Available at: https://urn.nsk.hr/urn:nbn:hr:213:546258. [Accessed: 18 April 2024]

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Metadata
Title (english)The Determinants of Country Risk Premium Volatility: Evidence from a Panel VAR Model
AuthorPetra Palić
AuthorPetra Posedel Šimović
AuthorMaruška Vizek
Author's institutionThe Institute of Economics, Zagreb
Scientific / art field,
discipline and subdiscipline		SOCIAL SCIENCES
Economics
Abstract (english)
We use data for 24 European countries, spanning from 1994 to 2015, in order to examine how changes in macroeconomic conditions influence country risk premium volatility proxied by sovereign spreads variance. In the first part of the empirical analysis, we estimate the univariate generalized autoregressive conditional heteroskedasticity (GARCH) model in order to obtain the conditional variance of sovereign bond spreads. We show that an increase in this variance coincides with economic and financial crisis occurring either in the country or globally. In the second part of the empirical analysis, we estimate the panel vector autoregression (panel VAR) model in order to model the interplay between macroeconomic fundamentals (inflation, output gap, public debt and interest rates) and the country’s risk premium volatility. We show that overheating of the economy, along with an unexpected increase in public debt, inflation and interest rates, increase the country’s risk premium volatility. We also show that a sudden increase in the country´s risk premium volatility depresses the economy, exerts deflationary pressures on consumer prices, and is followed by a strong and permanent increase in public debt.
Keywords (english)
Languageenglish
Publication typeScientific paper - Original scientific paper
Publication statusPublished
Peer reviewPeer review
Publication versionAccepted version
Journal titleCroatian Economic Survey
Numberingvol. 19, no. 1, pp. 37-66
p-ISSN1330-4860
e-ISSN1846-3878
DOIhttps://doi.org/10.15179/ces.19.1.2
URN:NBNurn:nbn:hr:213:546258
Publication2017-06-30
ProjectNumber: UIP-2013-11-1356/HR
Funding stream: UIP
Document URLhttps://hrcak.srce.hr/184543
Type of resourceText
Access conditionsOpen access
Terms of useLicence In copyright icon
Created on2018-03-21 10:18:32