Yves Nosbusch
Lecturer in Finance
London School of Economics
Education
Harvard University
Ph.D., Economics, 2006.
A.M., Economics, 2003.London School of Economics
M.Sc., Econometrics and Mathematical Economics, Distinction, 2001.
B.Sc., Econometrics and Mathematical Economics, First Class Honours, 1999.
Published Papers
Determinants of Sovereign Risk: Macroeconomic Fundamentals and the Pricing of Sovereign Debt, with Jens Hilscher, Review of Finance 14: 235-262, April 2010. Deutsche Bank Prize in Financial Economics Review of Finance Best Paper Award 2010 (Second Prize).
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. [pdf]
Interest Costs and the Optimal Maturity Structure of Government Debt, Economic Journal 118: 477-498, March 2008.
The government faces a trade-off between the benefits of tax smoothing and an associated increase in expected interest costs when choosing its optimal debt portfolio. The article solves for optimal policies in an incomplete markets model where the government uses two debt instruments, long-term and short-term noncontingent nominal bonds. In this setup the basic prescription is to borrow long and invest short even though equilibrium expected interest costs are higher on long-term debt. The resulting welfare gains are close to what the government could achieve with complete markets. Significant welfare gains are possible even in the presence of leverage constraints.
Intergenerational Risksharing and Equilibrium Asset Prices, with John Y. Campbell, Journal of Monetary Economics 54: 2251-2268, November 2007.
In the presence of overlapping generations, a social security system, with contingent taxes and benefits, can affect both asset prices and intergenerational risksharing. In a simple model with two risky factors of production - human capital, owned by the young, and physical capital, owned by all older generations - a social security system that optimally shares risks exposes future generations to a share of the risk in physical capital. Such a system reduces precautionary saving and increases the riskbearing capacity of the economy. Under plausible conditions it increases the riskless interest rate, and lowers the price and risk premium of physical capital.
Appendix for Intergenerational Risksharing and Equilibrium Asset Prices, with John Y. Campbell. [pdf]
Working Papers
Bond Market Clienteles, the Yield Curve and the Optimal Maturity Structure of Government Debt, with Stephane Guibaud and Dimitri Vayanos.
We propose a clientele-based model of the yield curve and optimal maturity structure of government debt. Clienteles are generations of agents at different life cycle stages in an overlapping-generations economy. An optimal maturity structure exists in the absence of distortionary taxes and induces efficient intergenerational risksharing. If agents are more risk-averse than log, then an increase in the long-horizon clientele raises the price and optimal supply of long-term bonds. But while a welfare-maximizing government caters to clienteles, it does not accommodate fully their demand, and limits issuance of long-term bonds to a level where these earn negative expected excess returns.[pdf]
Contact Information
London School of Economics
Department of Finance, Room A451
Houghton Street
London WC2A 2AE
United Kingdom
Phone: +44 (0) 20 7955 7319
Email: y.nosbusch at lse.ac.uk