Documents euro 249 results

"This paper studies the relationship between sovereign spreads and the interaction between debt composition and debt levels in advanced and emerging market countries. It finds that in emerging market countries there is a significant correlation between spreads and debt levels. This correlation, however, is not statistically significant in countries where most public debt is denominated in local currency. In advanced economies, the magnitude of the correlation between debt levels and spreads is about one-fifth of the corresponding correlation for emerging market economies. In eurozone countries, however, the correlation between spreads and debt ratios is similar to that of emerging market countries. The paper also shows that the financial crisis amplified the relationship between spreads and debt levels within the eurozone but had no effect on the relationship between spreads and debt in stand-alone countries. Finally, the paper shows that the relationship between debt levels and spreads is amplified by the presence of large net foreign liabilities. This amplifying effect of net foreign liabilities is larger in the eurozone than in stand-alone advanced economies. The paper concludes that debt composition matters and corroborates the original sin hypothesis that, rather than being a mere reflection of institutional weakness, the presence of foreign currency debt increases financial fragility and leads to suboptimal macroeconomic policies."

"The introduction of the euro meant that countries with sovereign debt problems could not use monetization and devaluation as a way to prevent default. The institutional structures of the euro were also widely thought to prevent a country in difficulties being bailed out by other euro members or having its sovereign debt purchased by the European Central Bank (ECB). Despite these restrictions, there was relatively little discussion about sovereign default in pre-Economic and Monetary Union debates among economists, and financial markets priced in almost no default risk in the pre-crisis years. The crisis has seen bailouts and bond purchases by the ECB but there has also been a sovereign default inside the euro and further defaults seem likely. The introduction of the euro was intended to bring greater stability by ending devaluations triggered by self-fulfilling runs on a currency. While this particular scenario can no longer happen, this paper discusses mechanisms whereby expectations that a country may leave the euro can lead to this outcome occurring."

"Il testo che viene qui presentato è un'analisi di tre crisi sovrapposte della ue, una strutturale, una politica ed una istituzionale. Le diverse tipologie di crisi convergono in un unico mix tossico, ma per chiarezza analitica, e per individuare le opportu­ne soluzioni, verranno descritte distintamente. Il proposito principale di questo articolo è appunto quello di sviluppare una comprensione delle tre cri­si sovrapposte e di suggerire alcune ampie risposte che potrebbero servire a risolverle."