Recent literature on the European debt crisis emphasizes that rising external trade and lending imbalances between the European Monetary Union's (EMU) Northern and Southern member states served as a crucial determinant behind speculative divergence between these two regions. However, these...

Do exchange rate regimes affect the conditions under which developed countries borrow? This paper argues that they do, but their impact on yields depends on the prevailing macroeconomic context. When investors regard inflation as the most relevant risk to bond holdings, monetary union has a...