Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94482
Authors: 
Gopal, Manasa
Pasche, Markus
Year of Publication: 
2012
Series/Report no.: 
Working Papers on Global Financial Markets 37
Abstract: 
Most current Eurobond proposals imply substantial cross-subsidisation since some countries partially pay the risk premia for others, thus creating moral hazard and disincentives for fiscal discipline. We suggest, instead, to use standard technologies of financial intermediation like pooling and collateralizing risks. The proposed Eurobond system decreases the costs for all participating nations which is Pareto improving. Since collateral requirements are calculated on individual risk, we eliminate cross-subsidisation. It is essential for the model that a significant fraction of governmental bonds is still issued individually since the model utilizes the risk perception abilities and disciplinating functions of the private capital market. We also discuss institutional issues of possible implementations.
Subjects: 
sovereign debt
Eurobond
collateral
pooling
cross-subsidisation
JEL: 
E62
E63
H63
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
232.07 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.