Please use this identifier to cite or link to this item:
http://dspace.mediu.edu.my:8181/xmlui/handle/10419/19684| Title: | Moral hazard and bail-out in fiscal federations: evidence for the German Länder |
| Keywords: | F34 H6 H7 G14 G15 E62 ddc:330 moral hazard bail-out sovereign bond spreads fiscal federalism Germany Länderfinanzen Öffentliche Schulden Öffentliche Anleihe Risikoprämie Finanzausgleich Moral Hazard Schätzung Deutschland Berlin |
| Issue Date: | 16-Oct-2013 |
| Description: | We identify investor moral hazard in the German fiscal federation. Our identification strategy is based on a variable, which was used by the German Federal Constitutional Court as an indicator to determine eligibility of two German states (Länder) to a bail-out, the interest payments-to-revenue ratio. While risk premia measured in the German sub-national bond market react significantly to the relative debt level of a state (Land), we also find that a larger interest payments-to-revenue ratio counter-intuitively lowers risk premia significantly. Furthermore, with increasing values the risk premia decrease more strongly. This is evidence of investor moral hazard, because a larger indicator value increases the likelihood of receiving a bail-out payment. Quantitatively, the effects are, however, quite small. Our findings are robust to a variety of sample changes. In addition, we provide a case study of the recent Federal Constitutional Court ruling on the Land Berlin, which had filed for additional federal funds. The negative response of the court did not lead to a change in financial markets' bail-out expectations. In sum, our results indicate significant investor moral hazard in the sub-national German bond market. |
| URI: | http://koha.mediu.edu.my:8181/xmlui/handle/10419/19684 |
| Other Identifiers: | http://hdl.handle.net/10419/19684 ppn:528422030 RePEc:zbw:bubdp1:5561 |
| Appears in Collections: | EconStor |
Files in This Item:
There are no files associated with this item.
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.