Front Matter Page
Strategy, Policy, and Review Department
Contents
1 Introduction
2 Data
3 Analyzing the impact of sovereign debt mispricing on economic outcomes
3.1 Sovereign spreads and their determinants
3.2 Effects on real GDP growth
4 Out-of-sample performance
5 Robustness and further results
6 Conclusion
7 Appendix: list of included countries, origin of variables, and robustness checks
8 References
FIGURES
1: Estimates of κ in OLS regression (2) at the quarterly frequency when the dependent variable is real GDP growth, varying the lag l in µit-1 . Squares indicate the point estimate; lines capture the 95% confidence interval, calculated using cluster-robust standard errors. * denotes significance at the 10% level, ** implies significance at the 5% level, *** indicates significance at the 1% level.
2: Estimates of κ in OLS regression (2) at the annual frequency when the dependent variable is a fiscal crisis dummy, varying the lag l in µit-1. Squares indicate the point estimate; lines capture the 95% confidence interval, calculated using cluster-robust standard errors. * denotes significance at the 10% level, ** implies significance at the 5% level, *** indicates significance at the 1% level.
TABLES
1: OLS regression (1), used to capture the average relationship between spreads and fundamentals
2: OLS regression (2), analyzing impact of past spread-mispricing on real GDP growth
3: Leave-one-out out-of-sample RMSE of different models for one-quarter ahead growth forecasts
4: Time-based out-of-sample RMSE of different models for one-quarter ahead growth forecasts
A1: 89 countries included in the analysis
A2: origin of variables
A3: OLS regression (1), used to capture the average relationship between spreads and fundamentals with additional covariates
A4: OLS regression (2), analyzing impact of past spread-mispricing on real GDP growth