The Sovereign Default Problem in the Eurozone: An Insurance-Based Approach

Arbeitspapier

This paper argues that the Eurozone crisis stems from a risk management failure in the Eurosystem’s design, and that applying insurance theory is useful. We model risk neutral agents choosing portfolios of government bonds of n countries in a monetary union and other assets. We firstly analyse a country’s debt choice, assuming as a benchmark case that the no-bailout threat is credible, accounting for the effect on its equilibrium interest rate, and then establish an equally efficient mutual insurance fund covering accruing indemnities almost certainly. We also discuss necessary institutional arrangements and other proposals in the light of our results.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 5389

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Portfolio Choice; Investment Decisions ; Asset Pricing; Trading Volume; Bond Interest Rates ; Insurance; Insurance Companies; Actuarial Studies ; National Debt; Debt Management; Sovereign Debt ; Intergovernmental Relations; Federalism; Secession
• Thema: European debt crisis ; sovereign debt ; bailout ; monetary union ; debt management

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Arnold, Nadjeschda ; Rees, Ray
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2015

Weitere Informationen

• Handle: http://hdl.handle.net/10419/110889
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ