Beschreibung:
This paper explores the implications of fiscal rules and independent fiscal institutions (IFIs) on sovereign risk. We document that fiscal rules contain sovereign default risk in 24 countries members of the European Union measured by the credit default swap (CDS) spreads. IFIs, through monitoring compliance with numerical fiscal rules and assuring the transparency of the budgetary process, lead to a reduction in the likelihood of sovereign default, especially those that went through a process of institutional reform. Moreover, having developed financial markets accompanied by both fiscal rules and IFIs contribute to a reduction in sovereign CDS premia