Theory-Experimental Seminar

Aurélien Eyquem (with S.Auray & X.Ma)

Université Lumière Lyon 2


Seminar 3 – 14:30


We develop a two-country model with an explicitly microfounded interbank market and sovereign default risk. Both features interact and give rise to a debt-banks-credit loop by which sovereign default risk can have large contractionary effects on the economy. Calibrated to the Euro Area, the model performs well in matching key business cycle facts on real, financial and fiscal time series. We then use the model to assess the effects of the Great Recession and quantify the potential effects of alternative unconventional policies on the dynamics of European economies. All the policies considered can bring sizable reductions in the welfare losses from the Great Recession, but policies targeted at sovereign bonds and interbank loans are more efficient than standard credit interventions.

Download pdf
Leave Comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

clear formSubmit

This site uses Akismet to reduce spam. Learn how your comment data is processed.