Figure 157 Shows the Difference Between Greek and German 10-Year Bond

Essay

Figure 15.7 shows the difference between Greek and German 10-year bond yields from 2007-2013. Answer the following questions:
(a) What does this data represent?
(b) In the Smets-Wouters DSGE model, what type of shock is this?
(c) How does this shock affect the macroeconomy in the Smets-Wouters DSGE model? Explain.Figure 15.7: 10-Year Bond Yields: Greece minus Germany
(Source: Federal Reserve Economic Data, St. Louis Federal Reserve)