Abstract
Summary: The Euro area has a unique monetary authority that governs money creation, but several individual-countries’ sovereign debts that differ in terms of safety. We analyse: i) the interactions between the financial and real sector in such an environment; ii) the role of government bonds as liquidity instruments; iii) whether and how the correlation structure of the sovereign-bonds’ market values affects the portfolio composition of liquidity instruments and prices, and the scope for a debt management policy at the Euro area level.
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