Essay title ;Eurozone centre and periphery: are 10-year spreads converging? A
model-based approach to the cases of Country 11and Country 22

Instructions: Based on the readings assigned for this course so far, as well as on other sources, that you are expected to find through your independent research, discuss the reasons why the 10-year year spreads in the two countries that you chose are diverging or converging. You must justify your answer by focusing on the macroeconomic variables of both countries in the period ********* or most recent available data).
Your essay should consist of three parts. Please use the same subtitles as below to identify each part.
Introduction: A macroeconomic overview of countries 1 and 2
You are expected to put together a brief introduction in which you summarise the macroeconomic features of both countries during the period ********* or most recent available data), placing special focus on debt to GDP ratios and the trends of 10-year yields in both countries and in the Eurozone (average). You may use synoptic tables to aid your analysis and to help you keep within the word limit. You are expected to carry out some independent research on the topic Please reference all bibliographical sources consulted. (Suggested length: 600-800 words).
Body: Yield spread dynamics: a model-based interpretation
-Select model(s) covered during the course that you think are best at explaining the dynamics followed by yield spreads during the period in question.
-Point out the way in which each model’s variables will represent aspects of the macroeconomic features of both countries.
-Determine the assumptions that need to be made.
-Use diagrams and explain verbally and graphically the dynamics of your analysis. (Suggested length: 500-700 words. Note: diagrams and equations do not count towards the word limit).
Conclusions:
-Sum up what you have been able to conclude through your model-based analysis about the convergence or divergence of spreads in the two countries.
-By focusing on the model(s) that you chose, discuss the strength and level of realism of each one of the model assumptions within the context of the problems in question. -Assess which macroeconomic elements require a more complex model to be explained properly.
1 Choose between: Austria, Belgium, Finland, France, Germany, and the Netherlands. 2 Choose between: Portugal, Ireland, Italy, Cyprus, Greece, and Spain.

-Point out any important variables omitted by the model (s), which you think should be included in order to achieve a more comprehensive picture of what is driving the yield trends in the two countries in question. (Suggested length: 600-800 words).
Bibliography:
- Please include a bibliography and reference all sources used. You may use any referencing system as long as it is consistent. (Bibliography and references do not count towards the word limit).
Overall word limit:2000 words (+ 10%).