This study presents a core-periphery model to determine the optimal size of the European Stability Mechanism (ESM), building on Jeanne and Ranciere (2011). While the periphery is subject to a probability of losing access to external credit, the core's incentive for setting up an ESM stems...

This paper documents a durable increase in the cross-sectoral dispersion of earnings expectations during the COVID-19 crisis. An empirical analysis shows that the rise in dispersion of earnings forecasts can be explained by the introduction of lockdown measures, which had a particularly adverse...

We study climate risk premiums in euro area corporate bond markets. As gauges of climate risk, we distinguish between physical and transition risks using textual analysis. Our findings show that, since the Paris agreement, physical risk is significantly priced in corporate bonds with longer-term...