The structural model of sovereign credit risk introduced in an earlier paper by the authors is applied here to measure the impact of introducing Eurobonds. Tranching (i. e. splitting the public debt into a senior and a junior tranche) is coupled with a cross-guarantee among eurozone countries and with a cash transfer. We show that Eurobonds can reduce the overall cost of servicing the public debt for some (high debt) countries in the euro area without increasing the cost for other countries. Moreover, they are likely to give governments an incentive to curb their deficits, due to the higher marginal cost of debt.

Baglioni, A. S., Cherubini, U., Eurobonds: a quantitative approach, <<REVIEW OF LAW & ECONOMICS>>, 2016; 2016 (12): 507-521. [doi:10.1515/rle-2016-0041] [http://hdl.handle.net/10807/100757]

Eurobonds: a quantitative approach

Baglioni, Angelo Stefano
Primo
;
2016

Abstract

The structural model of sovereign credit risk introduced in an earlier paper by the authors is applied here to measure the impact of introducing Eurobonds. Tranching (i. e. splitting the public debt into a senior and a junior tranche) is coupled with a cross-guarantee among eurozone countries and with a cash transfer. We show that Eurobonds can reduce the overall cost of servicing the public debt for some (high debt) countries in the euro area without increasing the cost for other countries. Moreover, they are likely to give governments an incentive to curb their deficits, due to the higher marginal cost of debt.
Inglese
Baglioni, A. S., Cherubini, U., Eurobonds: a quantitative approach, <<REVIEW OF LAW & ECONOMICS>>, 2016; 2016 (12): 507-521. [doi:10.1515/rle-2016-0041] [http://hdl.handle.net/10807/100757]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/100757
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