Investor Moral Hazard and ECB Monetary Policy Response

90 Pages Posted: 14 Aug 2017

Date Written: August 5, 2015


This paper develops a model of ECB bailout response to the European sovereign debt markets. The model shows that the ECBs’ approach to bailouts helped prevent investor moral hazard by helping to add a distortion. This research seeks to answer the question: Was the ECB able to abate the Moral Hazard when performing a bailout. This research finds that the ECB, through the use of a voting mechanism, was generally able to abate the moral hazard when performing the bailout during the 2007 European Sovereign Debt Crisis.

Keywords: Currency Union, Monetary Policy, ECB, Bailout, Moral Hazzard, Sovereign Debt

JEL Classification: E52, E58, F45

Suggested Citation

Goldberg, David, Investor Moral Hazard and ECB Monetary Policy Response (August 5, 2015). Available at SSRN: or

David Goldberg (Contact Author)

Texas A&M University ( email )

Langford Building A
798 Ross St.
College Station, TX 77843-3137
United States

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