Paths to Eurobonds

40 Pages Posted: 1 Nov 2012

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Ashoka Mody

International Monetary Fund (IMF) - Research Department

Shahin Vallée

London School of Economics & Political Science (LSE), European Institute, Students

Date Written: July 2012

Abstract

This paper discusses proposals for common euro area sovereign securities. Such instruments can potentially serve two functions: in the short-term, stabilize financial markets and banks and, in the medium-term, help improve the euro area economic governance framework through enhanced fiscal discipline and risk-sharing. Many questions remain on whether financial instruments can ever accomplish such goals without bold institutional and political decisions, and, whether, in the absence of such decisions, they can create new distortions. The proposals discussed are also not necessarily competing substitutes; rather, they can be complements to be sequenced along alternative paths that possibly culminate in a fully-fledged Eurobond. The specific path chosen by policymakers should allow for learning and secure the necessary evolution of institutional infrastructures and political safeguards.

Keywords: Eurobonds, Eurozone, Fiscal Risk-sharing, European Monetary Union, Financial Stability, Monetary Transmission Mechanism, Sovereign Debt, General Economics, Teaching of Economics

JEL Classification: E42, E44, E61, F33, F36, H63, H77, N24

Suggested Citation

Claessens, Stijn and Mody, Ashoka and Vallée, Shahin, Paths to Eurobonds (July 2012). IMF Working Paper No. 12/172. Available at SSRN: https://ssrn.com/abstract=2169717

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Ashoka Mody

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-9617 (Phone)
202-589-9617 (Fax)

HOME PAGE: http://www.amody.com

Shahin Vallée

London School of Economics & Political Science (LSE), European Institute, Students

United Kingdom

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