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Título:
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Liquidity, government bonds and sovereign debt crises
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Autor/a:
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Molteni, Francesco
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Abstract:
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This paper analyzes the Eurozone financial crisis through the lens of sovereign bond liquidity.
Using novel data, I show that repo haircuts on peripheral government bonds sharply increased
during the crisis, reducing their liquidity and amplifying the rise in their yields. I study the impact
of this liquidity shock on asset prices and macroeconomic variables in a general equilibrium model
with financial frictions calibrated for Ireland. The model confirms the rise in the required returns of
illiquid government bonds and predicts a substantial drop in economic activity and deflation.
Unconventional policy alleviates the effect of the liquidity shock. |
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Abstract:
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The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396. |
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Materia(s):
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-Repo
-Haircuts
-Liquidity shock
-Funding constraint
-Unconventional policy |
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Derechos:
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This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.
https://creativecommons.org/licenses/by/4.0/
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Tipo de documento:
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Documento de trabajo |
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