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The Relation between the High-Yield Bond Spread and the Unemployment Rate in the Euro Area
Örebro University, Örebro University School of Business. Division of Economics.ORCID iD: 0000-0001-8124-328x
Örebro University, Örebro University School of Business. Division of Statistics.ORCID iD: 0000-0002-0682-8584
Örebro University, Örebro University School of Business. National Institute of Economic Research, Stockholm, Sweden .ORCID iD: 0000-0002-4840-7649
2022 (English)In: Finance Research Letters, ISSN 1544-6123, E-ISSN 1544-6131, Vol. 46, no Part A, article id 102365Article in journal (Refereed) Published
Abstract [en]

In this paper, we study the relation between the high-yield bond spread and the unemployment rate in the euro area. This is done using Bayesian VAR models with stochastic volatility. The models are estimated assuming both Gaussian and non-Gaussian distributions for the error terms. Analysing data ranging from January 1998 to December 2020, our results show that an increase in the high-yield bond spread increases the unemployment rate. In terms of the specification of the models, we find that Gaussian error terms are preferred. Our findings hence lend support for the large body of previous literature relying on a Gaussianity assumption in their modelling frameworks.

Place, publisher, year, edition, pages
Elsevier, 2022. Vol. 46, no Part A, article id 102365
Keywords [en]
Bayesian VAR, Heavy tails, Non-Gaussian error terms
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:oru:diva-94864DOI: 10.1016/j.frl.2021.102365ISI: 000816916000018Scopus ID: 2-s2.0-85113146186OAI: oai:DiVA.org:oru-94864DiVA, id: diva2:1601690
Funder
The Jan Wallander and Tom Hedelius Foundation, Bv18-0018 P18-0201 W19-0021Swedish Research Council, 2018-05973Available from: 2021-10-09 Created: 2021-10-09 Last updated: 2022-07-27Bibliographically approved

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Kiss, TamásNguyen, HoangÖsterholm, Pär

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