ارزیابی ریسک در بازار اوراق قرضه دولتی منطقه یورو – نقش حکومت  Risk assessment on euro area government bond markets – the role of governance

1 Introduction During the euro area debt crisis, yield spreads increased substantially. Risk perception and risk assessment changed. This has been interpreted as wake-up-call contagion; see, e.g., Beirne and Fratzscher (2013), Giordano et al. (2013) and von Hagen et al. (2013). Several authors found that typical determinants, such as the debt-to-GDP ratio, explained much of the variation in the spreads, particularly after the outbreak of the crisis.1 The change in risk perception is regarded as evidence for multiple interest rate equilibria by several authors such as Aizenman et al. (2013), Beirne and Fratzscher (2013) and De Grauwe and Ji (2013). The concept of multiple interest rate equilibria on government bond markets was introduced by Calvo (1988). High debt levels make bond markets more vulnerable to multiple interest rate equilibria (Gros 2012). Thus, the debt-to-GDP ratio may have a dual function. Given expectations, it is a natural candidate to determine the equilibrium interest rate; furthermore, the debt-to-GDP ratio may also affect the dynamics of market participants’ expectations. Thus, the observation that the debt-to-GDP-ratio was a highly informative determinant of government bond spreads is reasonable. In July 2012, the European Central Bank (ECB) announced the Outright Monetary Transactions program (OMT), which so far has not been enacted. It was announced with the main argument that OMT would increase the effectiveness of monetary policy.2 According to OMT, the ECB is willing to buy government bonds from a distressed country as long as the country participates in an adjustment program and cooperates in terms of fiscal and economic policy with the institutions that manage the adjustment program. This intervention may hinder multiple interest rate equilibria from becoming explosive because the ECB could step in as the lender of last resort when the fiscal capacities of the other rescue funds are limited. Accordingly, after the announcement of OMT, government bond spreads declined, but they did not return to pre-crisis levels, at which time, they were almost zero.