The Study of Bond Yield Spread, Credit Default Swap and Economic Fluctuations of Eurozone

• Main Authors: Hao-Chung Hsiung, 熊昊中
• Other Authors: Wei-Shan Hu
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/23192564248099232803

碩士 === 中原大學 === 企業管理研究所 === 100 === Since the Euro area has been formed from 2002, the Eurozone countries not only shared the huge economic benefits, but also shortened the interest rate spread between the long-term and short-term interest rate among multiple European countries. However, the financial tsunami shocked the economy all over the world since 2008. In order to overcome this financial crisis, each European country competed for borrowing long-term debt to stimulate it’s own economy. Particularly, Greece raised the government budget deficit at the end of 2009, and sought for huge amount of financial support from other Eurozone countries, Euro central Bank (ECB) and IMF, which opened a prelude to the European sovereign-debt crisis. This financial crisis is rapidly spreading to the other Eurozone countries. Previous researches forecasted economic boom or depression by the expansion or contraction of long-and short-term spread of expansion or contraction. If the term spread expands, suggesting that the economy will boom, and vice versa. However, the interest spread of five European heavy sovereign-debt countries positively increased over past three years, which is inconsistent with previous studies. This investigation forecasts the fluctuation of economic boom or depression of each Eurozone country by employing the interest spread of the yields of 10-year public debt minus 3-month treasury bills yield matching with the real GDP growth rate and unemployment rate of each country. In order to estimate the default risk premium, the five-year sovereign bonds CDS rate is also used as the auxiliary variables. This study also forecasts the growth rate of real GDP and unemployment rate of each country via the original interest spread and the interest spread adjustment by employing the ordinary linear regression model, the linear regression model after adjusting the risk premium and the Probit model. The conclusions are summarized below: First, this study finds that the real GDP growth rate is more suitable than unemployment rate as the forecasting target of these two models. Second, this investigation finds that the risk premium adjusted regression model significantly improved the estimated coefficients for economic boom or depression in most countries, which is consistent with the theoretical expectations.