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FIRE for the Euro: A Superior Way to Bond Market Stabilization
Heinemann, Friedrich
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DOI:
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https://doi.org/10.1515/jbnst-2012-0609
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URL:
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https://ideas.repec.org/a/jns/jbstat/v232y2012i6p7...
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Weitere URL:
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https://www.degruyter.com/downloadpdf/j/jbnst.2012...
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Dokumenttyp:
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Zeitschriftenartikel
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Erscheinungsjahr:
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2012
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Titel einer Zeitschrift oder einer Reihe:
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Jahrbücher für Nationalökonomie und Statistik = Journal of Economics and Statistics
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Band/Volume:
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232
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Heft/Issue:
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6
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Seitenbereich:
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702-709
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Ort der Veröffentlichung:
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Berlin
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Verlag:
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De Gruyter Oldenbourg
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ISSN:
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0021-4027 , 2366-049X
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Sprache der Veröffentlichung:
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Englisch
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Einrichtung:
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Außerfakultäre Einrichtungen > SFB 884
Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
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Fachgebiet:
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330 Wirtschaft
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Abstract:
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Government bond markets within the euro zone may have fallen victim to a self-fulfilling crisis of confidence. Eurobonds may contribute to stabilization in the short-run but would imply destructive disincentives and incalculable risks for joint and several guarantors. Monetary interest rate equalization through the ECB government bond purchase program poses risks for central bank credibility and price stability. This contribution proposes fiscal interest rate equalization (FIRE) as an alternative. With FIRE, countries that benefit from low interest rates as a consequence of market panics would transfers some of their savings to subsidize the borrowing of crisis countries within a conditional fiscal scheme. The paper presents FIRE’s principles and discusses its advantages over alternative stabilization approaches. Furthermore, a simulation of a FIRE specification is presented which would shield Italy and Spain against interest rates above 5 percent.
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 | Dieser Eintrag ist Teil der Universitätsbibliographie. |
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