The response of the default risk premium to macroeconomic shocks

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Abstract

This research is concerned with identifying the response of the default risk premium to shocks to real output growth, inflation, and the stance of monetary policy. The paper employs the newly developed technique of generalized impulse response analysis [Journal of Econometrics 74 (1996) 119; Economics Letters 58 (1998) 17], a method that does not impose a priori restrictions as to the relative importance each of these variables may play in the transmission process. The results show the extent and the magnitude of the relationship between the risk premium and macroeconomic factors.

Original languageEnglish
Pages (from-to)261-272
Number of pages12
JournalQuarterly Review of Economics and Finance
Volume43
Issue number2
DOIs
StatePublished - 2003

Keywords

  • Default risk premium
  • Macroeconomics factors
  • Vector autoregression

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