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Euro White and Euro Yolk: Sovereign Debt Structure Stability in the Eurozone

Author

Listed:
  • Robert Joliet

    (IESEG School of Management, CNRS-LEM (UMR 9221), 3 rue de la Digue, 59000 Lille – France)

  • Rabia Nessah

    (IESEG School of Management, CNRS-LEM (UMR 9221), 3 rue de la Digue, 59000 Lille – France)

Abstract

In this paper, we derive a cost-minimizing approach for governments in the eurozone that have to define their debt structure in terms of currency of issuance and maturity. We introduce and characterize the concept of weighted coalitional α-equilibrium to assure stability of two tiers of the eurozone, the stronger (White) countries and the weaker (Yolk) countries. The equilibrium presents both the Pareto optimality of the countries in each tier and the stability against any deviation of each subcoalition. In a practical way, it would require either strong political integration within each tier or considerable market pressure.

Suggested Citation

  • Robert Joliet & Rabia Nessah, 2016. "Euro White and Euro Yolk: Sovereign Debt Structure Stability in the Eurozone," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 18(03), pages 1-15, September.
    • Handle: RePEc:wsi:igtrxx:v:18:y:2016:i:03:n:s0219198916500043
    DOI: 10.1142/S0219198916500043
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    More about this item

    Keywords

    Eurozone; sovereign debt; yield spreads; n-country game; coalition structure; coalitional equilibrium;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F3 - International Economics - - International Finance
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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