Sovereign yield spreads within currency unions may reflect the risk of outright default. Yet, if exit from the currency … union is possible, spreads may also reflect currency risk. In this paper, we develop a New Keynesian model of a small member … regime change. We find that currency risk accounts for about a quarter of Greek yield spreads. …

pay either large spreads in money markets or high rates for the scarce regional savings. We show that this asymmetry can …

This paper presents evidence that the bid-ask spreads in euro rates increased relative to the corresponding bid …-ask spreads in the German mark (DM) prior to the currency union. This comes with a decrease in transaction volume in the euro … rates in which spreads are endogenously determined. It is argued that the elimination of cross rates due to the introduction …

"limited", i.e. only be invoked when the guarantee threshold is not exceeded. We also explore the "blue-red" bonds proposal …

Debt mutualisation through Eurobonds has been proposed as a solution to the Euro crisis. Although this proposal found … some support, it also attracted strong criticisms as it risks raising the spreads for strong countries, diluting legacy … debt and promoting moral hazard by weak countries. Because Eurobonds are a new addition to the policy toolkit, there are …

bonds as a fiscal discipline device is considerably weakened, and issuing Eurobonds can be economically justified. …In this paper, we provide new evidence on the determinants of sovereign yield spreads and contagion effects in the euro … default risk is the main driver of yield spreads, suggesting small gains from greater liquidity. Fiscal fundamentals matter in …