Caggiano G., Greco L. (2012).
Fiscal and financial determinants of Eurozone sovereign spreads. Economics Letters, Volume 117, Issue 3, 2012, Pages 774-776.
We empirically investigate the determinants of sovereign spreads in the euro area. We find that the relationship is nonlinear, with a break in mid-2007. The impact of fiscal conditions on sovereign risk has strengthened. Increased financial volatility has widened the set of macro determinants of spreads. Nonlinear effects arise because of interaction between fiscal and financial variables.