Working Paper: CEPR ID: DP17217
Authors: Massimo Amato; Everardo Belloni; Carlo A. Favero; Lucio Gobbi
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.
Keywords: European Debt Agency; European Safe Assets; Debt Management
JEL Codes: H12; H63; H81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| European Debt Agency (EDA) (F34) | bond price stability (G12) |
| European Debt Agency (EDA) (F34) | overall debt levels (H63) |
| European Debt Agency (EDA) (F34) | countercyclical fiscal policy (E62) |
| European Debt Agency (EDA) (F34) | financial stability for member states (F55) |