We test the hypothesis that the government bond markets in the Eurozone are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We find evidence that a significant part of the surge in the spreads of the peripheral Eurozone countries during...

While acknowledging that the massive amounts of liquidity injected into the eurozone banking system by the ECB were absolutely necessary to save Europe’s banking system, Paul De Grauwe now criticizes these lender-of-last-resort operations as ill-designed, making it likely that the ECB will...