PRICING SOVEREIGN BOND RISK IN THE EMU AREA: AN EMPIRICAL INVESTIGATION: COMMENT

摘要

This paper proposes an assessment of euro-area spreads' determinants over the period 1999-2010. Specifically, the question addressed by the authors is how do market participants price sovereign debt? In the analysis, many determinants are considered and a particular attention is paid to credit ratings. A comprehensive literature review adds to the interest of the paper. The main results are the following: (a) credit ratings are not amongst the main drivers of euro sovereign spreads; (b) contagion effects materialized after 2010; and (c) the influence of debt ratios increases through time. These results have important policy implications. To set an example, consider result (a): Such a result suggests that improving macroeconomic fundamentals is more important than a change in the credit-rating-related regulatory framework.