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the EMU. -- monetary union ; inflation ; differentials ; collateral constraints ; cross-country heterogeneity ; household …
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. Households trade nominal private debt in equilibrium, with the borrowers being subject to a collateral constraint, which is tied …
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show that collateral policy can serve to dampen asymmetric shocks in a currency area when these shocks also affect the … collateral held by banks and when collateral portfolios of banks differ systematically across countries. In my model banks from 2 … countries use collateral to borrow from the money market or a central bank that targets a level of interest rate (or investment …
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This study examines the optimality of sovereign debt restructuring alternatives within a currency union. Its results suggest that upfront debt relief works better than extra lending, as the latter runs the risk of breaking up the union. Based on the model of Gali & Monacelli (2008), I adopt a...
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