Sovereign risk and macroeconomic stability in the euro area
نویسندگان
چکیده
Sovereign risk premia have risen sharply in several European countries, contributed to increased credit spreads in the private sector. If monetary policy cannot offset these credit spreads because it is constrained by the zero lower bound, sovereign risk threatens macroeconomic stability: private-sector beliefs of a weakening economy may become self-fulfilling. In this paper, we put forward a two-country model of a monetary union featuring a "sovereign risk channel" and analyze how sovereign risk affects macroeconomic stability. We explore to what extent a) fiscal austerity and b) measures to pool sovereign risk are suited to contain sovereign risk and restore macroeconomic stability.
منابع مشابه
Sovereign Credit Risk in the Eurozone
The roots of the Euro area crisis can be traced back to at least the summer of 2007. Although not picked up by the credit rating agencies until much later, the probability of default on sovereign debt increased in parallel with clear macroeconomic misalignments. These misalignments include recession-triggered budget deficits, bailout-motivated fiscal measures,1 as well as country-specific strat...
متن کاملFiscal deficits, financial fragility, and the effectiveness of government policies ¬リニ
Recent macro developments in the euro area have highlighted the interactions between fiscal policy, sovereign debt, and financial fragility. We take a structural macroeconomic model with frictions in the financial intermediation process, in line with recent research, but introduce asset choice and sovereign debt holdings in the portfolio of banks. Using this model, we emphasize a new crowding-o...
متن کاملPure or wake-up-call contagion? Another look at the EMU sovereign debt crisis
We test whether the sharp increase in sovereign spreads of euro-area countries with respect to Germany after the explosion of the Greek crisis was due to deteriorating macroeconomic and fiscal fundamentals or to some form of financial contagion. Our analysis includes indicators of domestic and external imbalances which were mostly disregarded by previous studies, and distinguishes between inves...
متن کاملInflation, deflation, and uncertainty: What drives euro-area option-implied inflation expectations, and are they still anchored in the sovereign debt crisis? ¬リニ
We tackle two questions in this paper: In the sovereign debt crisis, what moves the euro area inflation outlook and has the firm anchoring of medium to long-term inflation expectations been touched? Deriving densities from a new data set on options on the euro area harmonized index of consumer prices provides us with the full distribution of inflation expectations. The daily data set allows us ...
متن کاملSovereign Default and the Stability of Inflation Targeting Regimes
We analyse the impact of interactions between monetary and fiscal policy on macroeconomic stability. We find that in the presence of sovereign default beliefs a monetary policy, which aims to stabilize inflation through an active interest rate policy, will destabilize the economy if the feedback from debt surprises back to the primary surplus is too weak. This result, which relies on endogenous...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2013