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Central bank intervention, public debt and interest rate target zones

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  • Della Posta, Pompeo

Abstract

The euro area crisis has been characterized by speculative attacks reflecting the market fear that some high indebted countries could go bankrupt. What is puzzling, however, is that non-euro area countries with an equally large – and in some cases even larger – public debt-to-GDP ratios have not been subject to attacks. This fact, together with the convex non-linear behavior exhibited by interest rates have been explained by observing that euro area countries could not rely on a lender of last resort, and this made possible the occurrence of self-fulfilling speculative attacks.

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  • Della Posta, Pompeo, 2018. "Central bank intervention, public debt and interest rate target zones," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 311-323.
    • Handle: RePEc:eee:jmacro:v:56:y:2018:i:c:p:311-323
    DOI: 10.1016/j.jmacro.2018.04.001
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    Cited by:

    1. Della Posta, Pompeo, 2021. "Government size and speculative attacks on public debt," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 79-89.
    2. Christos Mavrodimitrakis, 2022. "Debt stabilization and financial stability in a monetary union: Market versus authority‐based preventive solutions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2582-2599, April.
    3. Pompeo Della Posta, 2021. "The economic and social costs of globalisation: A target zone analysis," The World Economy, Wiley Blackwell, vol. 44(3), pages 633-644, March.
    4. Pompeo Della Posta & Roberto Tamborini, 2022. "The Eurozone as an Inflation Target Zone," CESifo Working Paper Series 10014, CESifo.
    5. Pompeo Della Posta & Roberto Tamborini, 2022. "The Eurozone as an inflation target zone," DEM Working Papers 2022/7, Department of Economics and Management.
    6. Pompeo Della Posta & Roberto Tamborini, 2021. "The Existential Trilemma of EMU in a Model of Fiscal Target Zone," EconPol Working Paper 66, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Lu, You-Xun, 2022. "The stabilizing effect of the zero lower bound: A perspective of interest rate target zones," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 61-67.
    8. Della Posta, Pompeo & Tamborini, Roberto, 2023. "Does an inflation target zone help or hinder price stability?," Economic Modelling, Elsevier, vol. 129(C).
    9. Della Posta, Pompeo, 2023. "Public debt sustainability in a target zone model with heterogeneous agents," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 440-450.
    10. Pompeo Della Posta, 2021. "An analysis of the current backlash of economic globalization in a model with heterogeneous agents," Metroeconomica, Wiley Blackwell, vol. 72(1), pages 101-120, February.
    11. Pompeo Della Posta, 2022. "The Revival of Target Zone Modeling," Open Economies Review, Springer, vol. 33(4), pages 775-805, September.

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    More about this item

    Keywords

    Interest rates target zones; Central bank intervention; Public debt; Foreign debt; Exchange rates target zones; Speculative attacks;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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