In this paper we analyse debt stabilization in a monetary union that features endogenous risk premia. In particular, we analyse debt stabilization in two diametrically opposed regimes. In the first regime, the "national fiscal discipline regime", financial markets impose sovereign risk premia...

This paper evaluates four approaches to creating "safe assets" or asset portfolios for the euro area: (1) a diversified portfolio of senior tranches of sovereign debt ("national tranching"); (2) a senior security backed by a diversified pool of national sovereign debt ("ESBies"); (3) debt issued...

What makes an asset a “safe asset”? We study a model where two countries each issue sovereign bonds to satisfy investors' safe asset demands. The countries differ in the float of their bonds and their resources/fundamentals available to rollover debts. A sovereign's debt is more likely to be...