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Creating a Safe Asset without Debt Mutualization: the Opportunity of a European Debt Agency

Author

Listed:
  • Favero, Carlo A.
  • Amato, Massimo
  • Belloni, Everardo
  • Gobbi, Lucio

Abstract

This paper analyses the potential of a European Debt Agency (EDA) as an efficient debt management institution for the Euro area. The simulation of prices and quantities that would have been observed in a scenario with an operational EDA illustrates that there have been fluctuations in bond prices that EDA would have been able to prevent. Moreover, due to the less volatile price dynamics, EDA would have been capable to absorb the entire eurozone debt while reducing its size. This evidence speaks in favour of EDA as an institutional debt management tool for hedging Member States financing from market sentiment vagaries; creating a European Safe Asset; unburdening ECB from debt management and managing efficiently the implementation of fiscal rules.

Suggested Citation

  • Favero, Carlo A. & Amato, Massimo & Belloni, Everardo & Gobbi, Lucio, 2022. "Creating a Safe Asset without Debt Mutualization: the Opportunity of a European Debt Agency," CEPR Discussion Papers 17217, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17217
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    More about this item

    Keywords

    European debt agency; European safe assets; Debt management;
    All these keywords.

    JEL classification:

    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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