Towards a common European monetary union risk free rate
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Other documents of the author: Mayordomo, Sergio; Peña Sánchez de Rivera, Juan Ignacio; Schwartz, Eduardo S.
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Title
Towards a common European monetary union risk free rateDate
2009-09Abstract
A common European bond would yield a common European Monetary Union risk free rate. We present tentative estimates of this common risk free for the European Monetary Union countries from 2004 to 2009 using variables ... [+]
A common European bond would yield a common European Monetary Union risk free rate. We present tentative estimates of this common risk free for the European Monetary Union countries from 2004 to 2009 using variables motivated by a theoretical portfolio selection model. First, we analyze the determinants of EMU sovereign yield spreads and find significant effects of the credit quality, macro, correlation, and liquidity variables. However, their effects are different before and after the current financial crisis, being stronger in the latter period. Robustness tests with different data frequencies, benchmarks, liquidity variables, cross section regressions and balanced panels confirm the initial results. We propose four different estimates of the common risk free rate and show that, in most cases, this common rate could imply savings in borrowing costs for all the countries involved. [-]
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Bibliographic citation
NBER working paper series, v. 15353, 2009Is part of series
NBER working paper series15353
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National Bureau of Economic ResearchRights
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info:eu-repo/semantics/openAccess
info:eu-repo/semantics/openAccess