EconPapers    
Economics at your fingertips  
 

ESBies: Safety in the Tranches

Markus Brunnermeier (), Sam Langfield (), Marco Pagano (), Ricardo Reis, Stijn Van Nieuwerburgh and Dimitri Vayanos

No 11537, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The euro crisis was fueled by the diabolic loop between sovereign risk and bank risk, coupled with cross-border flight-to-safety capital flows. European Safe Bonds (ESBies), a union-wide safe asset without joint liability, would help to resolve these problems. We make three contributions. First, numerical simulations show that ESBies would be at least as safe as German bunds and approximately double the supply of euro safe assets when protected by a 30%-thick junior tranche. Second, a model shows how, when and why the two features of ESBies---diversification and seniority---can weaken the diabolic loop and its diffusion across countries. Third, we propose a step-by-step guide on how to create ESBies, starting with limited issuance by public or private-sector entities.

Keywords: bank-sovereign loop; ESBies; Euro crisis; monetary policy; public debt issuance; safe assets (search for similar items in EconPapers)
JEL-codes: E5 F3 G1 G2 H6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2016-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11537 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: ESBies: safety in the tranches (2017) Downloads
Working Paper: ESBies: safety in the tranches (2017) Downloads
Working Paper: ESBies: Safety in the tranches (2016) Downloads
Working Paper: ESBies: safety in the tranches (2016) Downloads
Working Paper: ESBies - Safety in the tranches (2016) Downloads
Working Paper: ESBies: Safety in the Tranches (2016) Downloads
Working Paper: ESBies: Safety in the tranches (2016) Downloads
Working Paper: ESBies: Safety in the tranches (2016) Downloads
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: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11537

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=11537

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-04-20
Handle: RePEc:cpr:ceprdp:11537