Sovereign Debt in an Economic Union: A Model of Bailouts and Contagion

摘要: We propose a model to account for two stylized facts about sovereign yields in the Euro Area: their convergence after 2000 and subsequent divergence 2008, contagion among of periphery financial crisis 2007-2008.Two borrowing countries share bailout guarantee by an institution with limited lending capacity. Contagion occurs as one country needing (or being perceived close needing) diminishes prospects another receiving well.We investigate how availability bailouts affects probability debt find following: i) available (near) certainty has good features lender last resort; ii) uncertainty arises resources are shared between countries, which may create severe moral hazard problem; iii) small highest potential hazard: it can disproportionately increase its beyond ability repay, effectively take exclusive control resources.