If you need an accessible version of this item please contact JSTOR User Support

Default Risk on Government Debt in OECD Countries

Alberto Alesina, Mark De Broeck, Alessandro Prati, Guido Tabellini, Maurice Obstfeld and Sergio Rebelo
Economic Policy
Vol. 7, No. 15 (Oct., 1992), pp. 427-463
DOI: 10.2307/1344548
Stable URL: http://www.jstor.org/stable/1344548
Page Count: 37
  • Download PDF
  • Cite this Item

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If you need an accessible version of this item please contact JSTOR User Support
Default Risk on Government Debt in OECD Countries
Preview not available

Abstract

Different European countries pay very different interest rates on their public debts. Will these differences disappear if and when exchange rates come to be irrevocably fixed in the European Monetary Union? Or rather will default risks in the high debt countries keep interest rates from converging? To answer this question, this paper investigates whether a perceived default risk is already priced by the market. The paper compares the interest rates on public and private financial instruments denominated in the same currencies in 12 OECD countries. A strong correlation is found between the size of public indebtedness and the spread between public and private rates of return. This correlation suggests that the markets perceive a default risk on the public debt of some OECD countries. The size of this default risk is however very small.

Page Thumbnails

  • Thumbnail: Page 
[427]
    [427]
  • Thumbnail: Page 
[428]
    [428]
  • Thumbnail: Page 
429
    429
  • Thumbnail: Page 
430
    430
  • Thumbnail: Page 
431
    431
  • Thumbnail: Page 
432
    432
  • Thumbnail: Page 
433
    433
  • Thumbnail: Page 
434
    434
  • Thumbnail: Page 
435
    435
  • Thumbnail: Page 
436
    436
  • Thumbnail: Page 
437
    437
  • Thumbnail: Page 
438
    438
  • Thumbnail: Page 
439
    439
  • Thumbnail: Page 
440
    440
  • Thumbnail: Page 
[441]
    [441]
  • Thumbnail: Page 
442
    442
  • Thumbnail: Page 
443
    443
  • Thumbnail: Page 
444
    444
  • Thumbnail: Page 
445
    445
  • Thumbnail: Page 
[446]
    [446]
  • Thumbnail: Page 
[447]
    [447]
  • Thumbnail: Page 
448
    448
  • Thumbnail: Page 
449
    449
  • Thumbnail: Page 
450
    450
  • Thumbnail: Page 
451
    451
  • Thumbnail: Page 
452
    452
  • Thumbnail: Page 
453
    453
  • Thumbnail: Page 
454
    454
  • Thumbnail: Page 
455
    455
  • Thumbnail: Page 
456
    456
  • Thumbnail: Page 
457
    457
  • Thumbnail: Page 
458
    458
  • Thumbnail: Page 
459
    459
  • Thumbnail: Page 
460
    460
  • Thumbnail: Page 
461
    461
  • Thumbnail: Page 
462
    462
  • Thumbnail: Page 
463
    463