Related Experiment Video
Updated: Sep 24, 2025
13:04
Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods
Published on: September 19, 2012
12.2K
Fiscal tensions and risk premium.
Piotr Ciżkowicz1, Grzegorz Parosa2, Andrzej Rzońca1
1Warsaw School of Economics, Al. Niepodleglosci 162, 02-554 Warsaw, Poland.
Empirica
|May 4, 2022
Summary
Fiscal adjustments, especially expenditure-based ones, significantly lower risk premiums during fiscal tensions. Supply-side reforms also help, with effects seen even from announcements.
Area of Science:
- Economics
- Public Finance
- International Finance
Background:
- The risk premium is a key indicator of financial market stability.
- Understanding factors influencing risk premiums during fiscal tensions is crucial for policymakers.
- Existing literature identifies numerous potential determinants of the risk premium.
Purpose of the Study:
- To analyze the isolated impact of variables on the risk premium following fiscal tensions.
- To identify key drivers of risk premium changes in OECD countries.
Main Methods:
- Student's t-tests and ANOVA analysis were employed.
- A dataset covering 22 OECD countries from 1978-2017 was used.
- Approximately one hundred potential determinants of the risk premium were studied.
Main Results:
- The size of fiscal adjustments is more critical than composition for reducing risk premiums.
- Expenditure-based fiscal adjustments are more effective than tax-based ones.
- Fiscal adjustments can overcome global risk aversion; supply-side reforms, particularly labor market reforms, are beneficial, with effects observable upon announcement.
Conclusions:
- Fiscal adjustment size and expenditure focus are key to lowering risk premiums.
- Supply-side reforms offer positive impacts on risk premiums, even preemptively.
- The relationship between risk premiums and other factors may exhibit time-breaks, requiring further causal investigation.
Related Concept Videos
01:26Equity Theory
5
Equity theory explains how our sense of fairness influences the dynamics of close relationships. Rooted in social psychology, the theory posits that individuals evaluate fairness by comparing the ratio of their contributions to the rewards they receive. Relationship satisfaction is highest when these ratios are perceived as balanced between partners, promoting mutual reciprocity and a sense of justice.Equity vs. Equality in RelationshipsEquity is distinct from equality. Fairness does not...
5
01:20Actuarial Approach
140
The actuarial approach, a statistical method originally developed for life insurance risk assessment, is widely used to calculate survival rates in clinical and population studies. This method accounts for participants lost to follow-up or those who die from causes unrelated to the study, ensuring a more accurate representation of survival probabilities.
Consider the example of a high-risk surgical procedure with significant early-stage mortality. A two-year clinical study is conducted,...
Consider the example of a high-risk surgical procedure with significant early-stage mortality. A two-year clinical study is conducted,...
140
01:12Relative Risk
390
Relative risk (RR) is a statistical measure commonly used in epidemiology to compare the likelihood of a particular event occurring between two groups. This metric is important for evaluating the relationship between exposure to a specific risk factor and the probability of a particular outcome. It plays a crucial role in medical research, public health studies, and risk assessment. Relative risk quantifies how much more (or less) likely an event is to occur in an exposed group compared to an...
390
03:26Framing Effects
7.5K
Information is everywhere and its presentation—such as how and when items are presented—can impact our perceptions and decisions surrounding the info. This broad concept umbrellas framing effects—influences that occur due to the way information is framed in its appearance, whether it’s purely the order or the specific wording of a message. Let’s take a look at numerous ways in which two versions of something can objectively say the same thing, yet we respond in...
7.5K
01:11Hazard Rate
196
The hazard rate, also known as the hazard function or failure rate, is a statistical measure used to describe the instantaneous rate at which an event occurs, given that the event has not yet happened. From a probabilistic perspective, it represents the likelihood that a subject will experience the event in a very small time interval, conditional on surviving up to the beginning of that interval. In terms of frequency, the hazard rate can be viewed as the ratio of the number of events to the...
196
01:20Lazarus's Cognitive Appraisal Theory
625
Cognitive psychologist Richard Lazarus proposed the cognitive-mediational theory of emotions, which emphasizes how individuals' assessments of stressors significantly affect their experience of stress. According to Lazarus, the stress response is determined by a two-step appraisal process: primary appraisal and secondary appraisal. These cognitive appraisals help individuals evaluate the potential impact of a stressor and determine the adequacy of their coping resources.
Primary Appraisal:...
Primary Appraisal:...
625