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Reforming the Eureopean Stability Mechanism

Title data

Bauer, Christian ; Herz, Bernhard:
Reforming the Eureopean Stability Mechanism.
In: Journal of Common Market Studies. Vol. 58 (May 2020) Issue 3 . - pp. 636-653.
ISSN 1468-5965
DOI: https://doi.org/10.1111/jcms.12951

Abstract in another language

The European stability mechanism (ESM) is a permanent crisis resolution mechanism for euro area countries. We analysed the costs of the current ESM refinancing design and evaluated an alternative asset‐backed securities (ABS) structure under different scenarios. Our simulation results indicate that switching to an ABS structure could substantially lower the ESM refinancing rate by up to 3.5 per cent. Moreover, the current structure severely limits the ESM's potential to stabilize financial markets. As an unintended consequence, the ESM is likely to act as a crisis accelerant rather than a stabilizer in the most likely case of requests for medium‐sized financial support from distressed ESM members at a time when other ESM countries might be unwilling or unable to provide new capital.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: European stability mechanism; financial instruments; euro area; ABS; sovereign debt
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I - International Economics and Finance
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I - International Economics and Finance > Chair Economics I - International Economics and Finance - Univ.-Prof. Dr. Bernhard Herz
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 30 Apr 2020 05:28
Last Modified: 30 Apr 2020 05:28
URI: https://eref.uni-bayreuth.de/id/eprint/52806