Series: Working Papers. 1403.
Author: Javier J. Pérez and Rocío Prieto.
Topics: Government debt | Financial risks | Quantitative methods | Crisis | Financial institutions, Banks.
Published in: Public Finance Review, November 2015, 43, pp. 786-815
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Abstract
We analyse the determinants of the structure of public debt in the case of Spain, from a sub-national perspective. The endogenous shift in the composition of debt (among short- vs long-term instruments, and loans vs securities) depends on observable measures of credit and liquidity risks. To discriminate among competing potential determinants, we set out empirical models that incorporate financial, economic and institutional variables. We estimate the models by GMM and make use of a new quarterly dataset of Spanish regional governments’ debt structure for the period 1995Q1-2012Q4. Our results show that the most robust determinants of regional public financial management decisions, as reflected by the structure of debt, are rollover risks and the expectation of central government support (as measured by the dynamics of transfers).