Eurobonds (or Coronabonds) Would not Be Costly for Northern Euro Area Countries
Journal
LSE Business Review
Type
newspaper article
Date Issued
2020-04-16
Author(s)
Abstract
Well-designed eurobonds would lower financing costs for many euro area countries while hardly or not increasing the costs for the others. These bonds should have an explicit guarantee from the ECB. The bonds could be used up to a limit of GDP (a low number of 10-25% of GDP would allow to observe market reactions before deciding whether to expand). Their introduction would increase the costs on regular German 10-year bonds by at most 10 to 30 basis points.
Language
English
HSG Classification
contribution to practical use / society
HSG Profile Area
SOF - System-wide Risk in the Financial System
References
Baglioni, A. S., & Cherubini, U. (2011). A theory of eurobonds. Working Paper, University of Bologna.
Bertasiute, A., Massaro, D., & Weber, M. (2020). The behavioral economics of currency unions: Economic integration and monetary policy. Journal of Economic Dynamics and Control, 112, 103850.
Bofinger, P., Dullien, S., Felbermayer, G., Hüther, M., Schularick, M., Südekum, J., & Trebsch, C. (2020). To avoid economic disaster, Europe must demonstrate financial solidarity. New Statesman, 30 March 2020, link.
De Grauwe, P. (2013). The European Central Bank as lender of last resort in the government bond markets. CESifo Economic Studies, 59(3), 520-535.
Delpla, J., & von Weizsäcker, J. (2010). The blue bond proposal. Bruegel Policy Brief, 2010(3).
Giavazzi, F., & Tabellini, G. (2020). Covid Perpetual Eurobonds: Jointly guaranteed and supported by the ECB. VoxEU, 24 March 2020, link.
Gourinchas, P. O., & Rey, H. (2007). From world banker to world venture capitalist: US external adjustment and the exorbitant privilege. In G7 current account imbalances: Sustainability and adjustment (pp. 11-66). University of Chicago Press.
Ilzetzki, E., Reinhart, C. M., & Rogoff, K. S. (2020). Why Is the Euro Punching Below Its Weight? Working Paper No. 26760, National Bureau of Economic Research.
OECD (2020). Sovereign Borrowing Outlook for OECD Countries 2020.
Bertasiute, A., Massaro, D., & Weber, M. (2020). The behavioral economics of currency unions: Economic integration and monetary policy. Journal of Economic Dynamics and Control, 112, 103850.
Bofinger, P., Dullien, S., Felbermayer, G., Hüther, M., Schularick, M., Südekum, J., & Trebsch, C. (2020). To avoid economic disaster, Europe must demonstrate financial solidarity. New Statesman, 30 March 2020, link.
De Grauwe, P. (2013). The European Central Bank as lender of last resort in the government bond markets. CESifo Economic Studies, 59(3), 520-535.
Delpla, J., & von Weizsäcker, J. (2010). The blue bond proposal. Bruegel Policy Brief, 2010(3).
Giavazzi, F., & Tabellini, G. (2020). Covid Perpetual Eurobonds: Jointly guaranteed and supported by the ECB. VoxEU, 24 March 2020, link.
Gourinchas, P. O., & Rey, H. (2007). From world banker to world venture capitalist: US external adjustment and the exorbitant privilege. In G7 current account imbalances: Sustainability and adjustment (pp. 11-66). University of Chicago Press.
Ilzetzki, E., Reinhart, C. M., & Rogoff, K. S. (2020). Why Is the Euro Punching Below Its Weight? Working Paper No. 26760, National Bureau of Economic Research.
OECD (2020). Sovereign Borrowing Outlook for OECD Countries 2020.
Eprints ID
260331
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