We study the nature of sovereign credit risk using an extensive sample of CDS spreads for 26 developed and emerging-market countries. Sovereign credit spreads are surprisingly highly correlated, with just three principal components accounting for more than 50 percent of their variation. Sovereign credit spreads are generally more related to the U.S. stock and high-yield bond markets, global risk premia, and capital flows than they are to their own local economic measures. We find that the excess returns from investing in sovereign credit are largely compensation for bearing global risk, and that there is little or no country-specific credit risk premium. A significant amount of the variation in sovereign credit returns can be forecast using U.S. equity, volatility, and bond market risk premia.

How Sovereign is Sovereign Credit Risk

Who cooperates on R&D?

This article argues that to understand the behavior of productivity statistics, it is necessary to reexamine the basic assumptions underlying growth accounting. In particular, it offers theoretical and empirical support for the assertion that the elasticity of output with respect to an input like capital or labor might differ from the share of the input in total factor income. The theories offered in support of this possibility allow for spillovers of knowledge, specialization with monopolistic competition, and endogenous accumulation of labor-saving technological change. Evidence on the form of aggregate production is drawn from data for many countries and for long historical time periods. The specific interpretation of the productivity slowdown that is offered is that a low elasticity of output with respect to labor causes labor productivity growth rates to fall when labor growth speeds up.

/pdf/crazy-explanations-for-the-productivity-slowdown-2w2wk8i2ie.pdf

Crazy Explanations for the Productivity Slowdown

Sovereign borrowing by developing countries: What determines market access?

This paper investigates the effects of macroeconomic fundamentals on emerging market sovereign credit spreads. We find that the volatility of terms of trade in particular has a statistically and economically significant effect on spreads. This is robust to instrumenting terms of trade with a country-specific commodity price index. Our measures of country fundamentals have substantial explanatory power, even controlling for global factors and credit ratings. We also estimate default probabilities in a hazard model and find that model implied spreads capture a significant part of the variation in observed spreads out-of-sample. The fit is better for lower credit quality borrowers.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1492705_code93882.pdf?abstractid=687499&mirid=1&type=2

Determinants of Sovereign Risk: Macroeconomic Fundamentals and the Pricing of Sovereign Debt

The leading economic problem of our time is the high and persistent level of unemployment. As of early 1985, there are no signs that the severity of unemployment will weaken within the near future. This paper discusses first some basic developments of labour supply and labour demand in the Federal Republic of Germany (FRG)-the composition of the labour supply and the structure of the labour demand for persons and hours worked, as well as the dynamics of the unemployment pool. The next section reviews very briefly some empirical findings explaining the rise in the NAIRU where we make the distinction between the 'no-shock' and the actual NAIRU. Following suggestions put by the organizers of the conference, we then elaborate on the employment function. In the empirically oriented literature most employment functions use labour services, i.e. total hours worked, as the dependent variable, thus assuming homogeneity of labour demand with respect to jobs and working hours. In the German political arena, however, the distinction between persons employed and hours worked is particularly important. First, it figures in the employment aims of labour unions, who request reductions in weekly working hours in order to induce higher manning. Second, the distinction arises in the context of overtime work, for it has been suggested that the reduction in overtime to standard working hours could create more than 1 million new jobs in Germany. We present some estimated labour demand functions, which take into account these two dimensions of labour demand (jobs and hours) and which are used to elaborate on the direction and magnitude of the employment effects of reductions in wage costs and increases in overtime premia.

http://www.jstor.org/stable/pdfplus/2554380.pdf

The Nature and Causes of Unemployment in the Federal Republic of Germany since the Seventies: An Empirical Investigation

‘The pricing of bonds and bank loans in international markets: An empirical analysis of developing countries' foreign borrowing’ by Sebastian Edwards

Not available in German. In the face of complex budget constraints the assumption of rationally acting individuals having complete knowledge of the tax system is a theoretical borderline. The specific issues examined in this study are: (i) "to what extent do consumers (here married women) perceive their true marginal tax rate when they make their labor supply decisions?", and (ii) "how does the perception of the marginal tax rate differ among various socio-economic groups ?". Using different approaches and different data sets we consistently find that: (i) against conventional wisdom the assumption of complete knowledge of the tax system does not fit the data well, and that (ii) education apears to be the main determinant of a correct perception of the marginal tax rate

/pdf/tax-illusion-and-labour-supply-of-married-women-evidence-1q5byywtxi.pdf

Tax illusion and labour supply of married women : evidence from German data

Worksharing and factor prices : a comparison of three flexible functional forms for nonlinear cost schemes

The paper provides a theoretical and empirical framework to analyze the effects of change in various labor-cost parameters on employment and labor utilization. By accounting for overtime work, a nonlinear cost scheme is obtained that can serve as an explanation of procyclic al movements in labor productivity. A generalized Leontief system, based on an onlinear labor-cost scheme, is estimated for employment, average hours worked, and capital input. The empirical evidence is consistent with the stylized fact of procyclical labor productivity. A reduction of standard hours leads to a loss in employment. Copyright 1988 by WWZ and Helbing & Lichtenhahn Verlag AG

Heinz König

Papers

The Nature and Causes of Unemployment in the Federal Republic of Germany since the Seventies: An Empirical Investigation

‘The pricing of bonds and bank loans in international markets: An empirical analysis of developing countries' foreign borrowing’ by Sebastian Edwards

Tax illusion and labour supply of married women : evidence from German data

Worksharing and factor prices : a comparison of three flexible functional forms for nonlinear cost schemes

Employment, Labour Utilization and Procyclical Labour Productivity