IMF Working Papers

Policy Credibility and Sovereign Credit: The Case of New EU Member States

By Manmohan S. Kumar, Jirí Jonáš, David Hauner

January 1, 2007

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Manmohan S. Kumar, Jirí Jonáš, and David Hauner. Policy Credibility and Sovereign Credit: The Case of New EU Member States, (USA: International Monetary Fund, 2007) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

References to policy credibility, particularly with regard to fiscal policy, are ubiquitous in both economic literature and financial markets, even though it is not directly observable. The case of the EU new member states (NMS)-emerging markets joining a supranational entity that is generally considered to have higher policy credibility-provides a unique experiment to assess the effects of credibility on sovereign credit. This paper examines the impact of EU accession on three key variables that can reflect in varying degrees policy credibility: sovereign ratings, foreign currency spreads, and local currency yields. The results suggest that the NMS appear to have enjoyed higher credibility compared to their peers.

Subject: Balance of payments, Currencies, Current account balance, Emerging and frontier financial markets, Financial markets, Financial services, Inflation, Money, Prices, Real interest rates

Keywords: Accession country, Credit spreads, Currencies, Current account, Current account balance, Emerging and frontier financial markets, EU accession, EU membership, Global, Inflation, New EU member states, NMS effect, Per capita income, Policy credibility, Real interest rates, Sovereign ratings, WP, Yield

Publication Details

  • Pages:

    29

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2007/001

  • Stock No:

    WPIEA2007001

  • ISBN:

    9781451865653

  • ISSN:

    1018-5941

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