The replacement of national currencies by a common currency in the EMU causes a monetary externality if the European Central Bank is inclined to monetize part of outstanding government debt in the community.High government debt in one part of the EU then increases the common inflation rate.We...

Although there is by now strong evidence that sovereign risk premia are driven by a common factor, little is known about the detailed linkages between sovereign bond markets. We employ the VAR method by Diebold and Yilmaz (2009) to analyse the strength and direction of bilateral linkages between...

We use the forecast-error variance decompositions from a VAR with daily sovereign bonds spreads since 2000 to detail the linkages between EU sovereign bond markets and banks over time. Using new summary statistics on the matrix of bilateral linkages, we show Spain is systemic for Europe. Its...

We examine international fiscal coordination in a world where markets are integrated but national governments are sovereign. Consequences of the liberalization of the capital market on national fiscal policies and possible remedies to resulting ine¢ciencies are analyzed. A simple model, with N...

The paper discusses and revisits some of the most popular stories behind the 2001 financial crisis in Argentina, i.e. the prolonged overvaluation of the peso owing to the Currency Board arrangement, the lack of fiscal adjustment, and the negative external environment which triggered a “sudden...