Economics at your fingertips  

Debt stabilization games in a monetary union: What are the effects of introducing eurobonds?

Jacob Engwerda (), Bas van Aarle and Tzanis Anevlavis

Journal of Macroeconomics, 2019, vol. 59, issue C, 78-102

Abstract: This paper analyzes how the introduction of Eurobonds affects debt dynamics in a two-country monetary union model. Monetary and fiscal authorities are engaged in dynamic government debt stabilization games in which interest rates on government debt adjust endogenously. Three different equilibria are considered: the non-cooperative Nash open-loop equilibrium, the fiscal coordination equilibrium and the fully cooperative equilibrium. It is shown how the effects of Eurobonds depend on the game-theoretic equilibrium/institutional framework in place, the initial debt levels, policy makers’ concerns with debt stabilization and the strength of financial market discipline.

Keywords: Debt stabilization; Monetary union; Non-linear dynamical systems; Risk premium; Eurobonds (search for similar items in EconPapers)
JEL-codes: C7 C62 E6 F4 H6 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2020-01-17
Handle: RePEc:eee:jmacro:v:59:y:2019:i:c:p:78-102