Working Paper: CEPR ID: DP720
Authors: Alberto Giovannini; Gustavo Piga
Abstract: This paper discusses several determinants of the differential between yields on Italian government securities and yields on foreign government securities. We concentrate on expectations of (at least partial) insolvency, tax factors and exchange rate expectations. The evidence suggests that most of the differential between the cost of Italian debt and the cost of foreign (for example, German) debt is due to exchange rate expectations.
Keywords: public debt; risk premium; exchange rate expectations; withholding tax; italian debt
JEL Codes: E42; E43; F34; H63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Exchange Rate Expectations (F31) | Yield Differential (J31) |
| Withholding Taxes (H26) | Yield Differential (J31) |
| Risk Premium (G19) | Yield Differential (J31) |