Show simple item record Molteni, Francesco 2017-12-01T11:38:25Z 2017-12-01T11:38:25Z 2017-08
dc.description.abstract 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.
dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries ADEMU Working Paper Series;72
dc.rights 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.
dc.title Liquidity, government bonds and sovereign debt crises
dc.type info:eu-repo/semantics/workingPaper
dc.subject.keyword Repo
dc.subject.keyword Haircuts
dc.subject.keyword Liquidity shock
dc.subject.keyword Funding constraint
dc.subject.keyword Unconventional policy
dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
dc.rights.accessRights info:eu-repo/semantics/openAccess


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