Author:
Amato Massimo,Belloni Everardo,Favero Carlo A.,Gobbi Lucio,Saraceno Francesco
Abstract
AbstractThis paper puts forward a proposal to complete the ECB Transmission Protection Instrument (TPI) with the aim of making it more effective in anchoring the yields of European sovereign debts to Member States’ fundamentals. We use a model in which yields fluctuate within bands, which we specify following two alternative approaches: stochastic and deterministic. The resulting fluctuation's interval represents the range of yields that can be seen as justified by Member States’ fundamentals; yields outside the band would instead trigger the ECB intervention as foreseen by the TPI. The proposal minimizes the risk of moral hazard, as the fluctuation bands vary as each country's creditworthiness changes. Moreover, the proposal is directly implementable with existing Treaties.
Funder
Università Commerciale Luigi Bocconi
Publisher
Springer Science and Business Media LLC
Subject
Economics and Econometrics,Sociology and Political Science,Finance
Reference47 articles.
1. Alogoskoufis, S., & Langfield, S. (2020). Regulating the doom loop. International Journal of Central Banking, 16, 251–292.
2. Amato, M., & Saraceno, F. (2022). Squaring the circle: How to guarantee fiscal space and debt sustainability with a European Debt Agency. SSRN Journal. https://doi.org/10.2139/ssrn.4011081
3. Amato, M., Belloni, E., & Falbo and L. Gobbi,. (2021). Europe, public debts, and safe assets: The scope for a European Debt Agency. Economia Politica, 38(3), 823–861.
4. Amato, M., Belloni, E., Favero, C., & Gobbi, L. (2022). Creating a safe asset without debt mutualization: the opportunity of a european debt agency. SSRN Journal. https://doi.org/10.2139/ssrn.4079033
5. Amato, M. (2020). L’eurozona fra il pericolo della dissoluzione e l’occasione di un ripensamento. Economia e Politica, 12(1). https://www.economiaepolitica.it/politiche-economiche/europa-e-mondo/eurozona-dissoluzione-pericolo-occasione-ripensamento/.