Market discipline and the use of government bonds as collateral in the EMU
AbstractThe confidence that financial markets are able to discipline the debt behaviour of governments is not very high. Therefore, the Stability and Growth Pact has been implemented as an institutional constraint to substitute for the market mechanism. With the weakening of the Pact, market discipline could gain importance again. To strengthen market discipline, reasons for its failure in the euro area have to be analysed. One possible reason could be that the European Central Bank accepts all European government bonds without distinction in its monetary policy auctions as collateral. This could provide the financial market with a signal that these government securities are equally (non-)risky and that a differentiation with respect to risk premia is not needed. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 06-46.
Date of creation: 2006
Date of revision:
Stability and Growth Pact; Market Discipline; Collateral; Repo;
Find related papers by JEL classification:
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-10 (All new papers)
- NEP-CFN-2007-03-10 (Corporate Finance)
- NEP-EEC-2007-03-10 (European Economics)
- NEP-MAC-2007-03-10 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Artis, Michael J & Winkler, Bernhard, 1997. "The Stability Pact: Safeguarding the Credibility of the European Central Bank," CEPR Discussion Papers 1688, C.E.P.R. Discussion Papers.
- Eichengreen, Barry & von Hagen, Jürgen, 1995.
"Fiscal Policy and Monetary Union: Federalism, Fiscal Restrictions and the No-Bailout Rule,"
CEPR Discussion Papers
1247, C.E.P.R. Discussion Papers.
- Barry Eichengreen and Jurgen von Hagen., 1995. "Fiscal Policy and Monetary Union: Federalism, Fiscal Restrictions and the No-Bailout Rule," Center for International and Development Economics Research (CIDER) Working Papers C95-056, University of California at Berkeley.
- Carsten Hefeker, 2003. "Credible at last? Reforming the Stability Pact," Intereconomics: Review of European Economic Policy, Springer, vol. 38(1), pages 15-18, January.
- Arnold, Ivo & Lemmen, Jan, 2001.
"The Vulnerability of Banks to Government Default Risk in the EMU,"
Wiley Blackwell, vol. 4(1), pages 101-25, Spring.
- Ivo J. M. Arnold & Jan J.G. Lemmen, 1999. "The Vulnerability of Banks to Government default risk in the EMU," FMG Special Papers sp115, Financial Markets Group.
- Ardagna Silvia & Caselli Francesco & Lane Timothy, 2007.
"Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 7(1), pages 1-35, August.
- Ardagna, Silvia & Caselli, Francesco & Lane, Timothy, 2004. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," CEPR Discussion Papers 4661, C.E.P.R. Discussion Papers.
- Francesco Caselli, 1998. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," IMF Working Papers 98/55, International Monetary Fund.
- Ardagna, Silvia & Lane, Timothy & Caselli, Francesco, 2007. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," Scholarly Articles 2579739, Harvard University Department of Economics.
- Silvia Ardagna & Francesco Caselli & Timothy Lane, 2005. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," CEP Discussion Papers dp0670, Centre for Economic Performance, LSE.
- Silvia Ardagna & Francesco Caselli & Timothy Lane, 2004. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," NBER Working Papers 10788, National Bureau of Economic Research, Inc.
- Elton, Edwin J. & Gruber, Martin J. & Agrawal, Deepak & Mann, Christopher, 2004. "Factors affecting the valuation of corporate bonds," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2747-2767, November.
- Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 65-113, 04.
- Beetsma, Roel & Uhlig, Harald, 1999. "An Analysis of the Stability and Growth Pact," Economic Journal, Royal Economic Society, vol. 109(458), pages 546-71, October.
- Jan J.G. Lemmen & Charles A.E. Goodhart, 1999. "Credit Risks and European Government Bond Markets: A Panel Data Econometric Analysis," Eastern Economic Journal, Eastern Economic Association, vol. 25(1), pages 77-107, Winter.
- Sylvester Eijffinger, 2003. "How can the Stability and Growth Pact be improved to achieve both stronger discipline and higher flexibility?," Intereconomics: Review of European Economic Policy, Springer, vol. 38(1), pages 10-15, January.
- Bernoth, Kerstin & Schuknecht, Ludger & von Hagen, Jürgen, 2004. "Sovereign Risk Premia in the European Bond Market," CEPR Discussion Papers 4465, C.E.P.R. Discussion Papers.
- Linzert, Tobias & Nautz, Dieter & Bindseil, Ulrich, 2004. "The longer term refinancing operations of the ECB," Working Paper Series 0359, European Central Bank.
- Gande, Amar & Parsley, David C., 2005.
"News spillovers in the sovereign debt market,"
Journal of Financial Economics,
Elsevier, vol. 75(3), pages 691-734, March.
- Giampaolo Gabbi & Andrea Sironi, 2005. "Which factors affect corporate bonds pricing? Empirical evidence from eurobonds primary market spreads," The European Journal of Finance, Taylor & Francis Journals, vol. 11(1), pages 59-74.
- Lorenzo Codogno & Carlo Favero & Alessandro Missale, 2003. "Yield spreads on EMU government bonds," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 503-532, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.