Eurobonds: A Quantitative Approach
-
Angelo Baglioni
and
Umberto Cherubini
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.
Acknowledgements
Paper prepared for the Workshop on Eurobonds Beyond Crisis Management, Hamburg, 8–9 January 2016. We are grateful to Thomas Eger and Hans-Bernd Schäfer, as well as to two anonymous referees, for their very useful comments on previous drafts of this paper.
References
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©2016 by De Gruyter
Articles in the same Issue
- Frontmatter
- Introduction: Eurobonds beyond Crisis Management
- The Economics and Law of Sovereign Debt and Risk Sharing: Some Lessons from the Eurozone Crisis
- Eurobonds: A Quantitative Approach
- Consequences of Different Eurobond Proposals
- Contagion in the EMU – The Role of Eurobonds with OMTs
- How Can Eurobonds Be Legally Implemented into European Law?
- Is there Life in the Old Dog Yet? Observations on the Political Economy and Constitutional Viability of Common Debt Issuing in the Euro Area
- Eurobonds: Legal Design Features
- Eurobonds Past and Present: A Comparative Review on Debt Mutualization in Europe
Articles in the same Issue
- Frontmatter
- Introduction: Eurobonds beyond Crisis Management
- The Economics and Law of Sovereign Debt and Risk Sharing: Some Lessons from the Eurozone Crisis
- Eurobonds: A Quantitative Approach
- Consequences of Different Eurobond Proposals
- Contagion in the EMU – The Role of Eurobonds with OMTs
- How Can Eurobonds Be Legally Implemented into European Law?
- Is there Life in the Old Dog Yet? Observations on the Political Economy and Constitutional Viability of Common Debt Issuing in the Euro Area
- Eurobonds: Legal Design Features
- Eurobonds Past and Present: A Comparative Review on Debt Mutualization in Europe
