Interest rate’s determinants originating in the public sector
Abstract
The sovereign risk premium has risen not only in Euro area, but also in non-Euro area member states of EU after COVID-19 pandemic.This paper uses the new Keynesian model to research sovereign risk channel. The model is changed for non-Euro area countries because there is no common monetary policy for Euro area. Due to this reason, the model applies separately for a single country. By to the low level of GDP per capita in non-Euro area states, the main purpose of economic policy for all of them is to achieve high economic growth reaching the average level shortly for the Euro area. Due to this, an important aim for these countries is for the sovereign risk to be kept at an optimal level.
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