Determinants of the Government Bond Yields of Italy, Spain, Portugal and Greece


  • Sergey Yakubovskiy Odessa I. I. Mechnikov National University
  • Giorgio Dominese Transition Studies Research Network
  • Tetiana Rodionova Odessa I. I. Mechnikov National University
  • Valeriia Derenko Odessa I. I. Mechnikov National University



government bond yields, government debt; budget balance; European Central Bank; Southern Europe


This article analyzes the trends in the yields of 10-year government securities of the countries of Southern Europe, in particular Greece, Italy Portugal and Spain, over the period 2005-2020. To study the factors affecting the rate of government securities yields of these countries, regression models using the least squares method and vector autoregression framework, namely the Granger test, were constructed. The models investigate the impact of various independent variables, namely government debt, government budget balance, real effective exchange rate and GDP on profitability of the national bonds. It was proved that in the conditions of the ECB's unconventional monetary policy, which continually stimulates demand for government securities, internal factors are no longer the main ones in determining the yields on national bonds and, accordingly, the cost of servicing the public debt of the euro area countries. The consequences of the ECB's monetary policy were most evident in 2020, when unprecedented financial stimulus measures were implemented in the fight against the impact of the COVID-19 pandemic, which led to a drop in government bond yields in Southern Europe to historically low levels. Such a strong dependence of the demand for government bonds and the cost of servicing public debt of Southern European countries on an external factor - the policy of the European Central Bank can lead to serious shocks for national economies in the future, especially when the ECB is forced to abandon the over-expansionary monetary policy.


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Author Biographies

Sergey Yakubovskiy, Odessa I. I. Mechnikov National University

Doctor of Economics, Professor, Chair of the Department of World Economy and International Economic Relations,

Tetiana Rodionova, Odessa I. I. Mechnikov National University

Ph.D. (Economics), Associate Professor of the Department of World Economy and International Economic Relations.

Valeriia Derenko, Odessa I. I. Mechnikov National University

Competitor at the Department of World Economy and International Economic Relations.


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