On the Optimal Design of a Financial Stability Fund.
We develop a model of a Financial Stability Fund (the "Fund" henceforth) for a union of sovereign countries. By design, the contract prevents country defaults, as well as undesired expected losses, which in a union translate into excessive risk mutualizations. A participant country has greater abili...
| Publicado en: | Review of Economic Studies Vol. 93; no. 4; pp. 2135 - 2181 |
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| Autores principales: | , , , |
| Formato: | Artículo |
| Publicado: |
Oxford University Press / USA
Jul2026
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| Materias: | |
| Acceso en línea: | Ver este registro en EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=195161444&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 195161444 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00346527 REM jtl: Review of Economic Studies issn: 00346527 maglogo: N pubinfo: dt: Jul2026 vid: 93 iid: 4 pid: 622 pub: Oxford University Press / USA artinfo: ui: 195161444 10.1093/restud/rdaf076 ppf: 2135 ppct: 46 formats: tig: atl: On the Optimal Design of a Financial Stability Fund. aug: au: Ábrahám, Árpád Carceles-Poveda, Eva Liu, Yan Marimon, Ramon affil: University of Bristol, UK Stony Brook University, USA School of Business, Sun Yat-sen University, China European University Institute, Italy; Barcelona School of Economics, Universitat Pompeu Fabra, CREi, Spain; CEPR, UK; and NBER, USA su: Public debts International economic integration Stabilization funds Risk sharing European Sovereign Debt Crisis, 2009-2018 Moral hazard Counterparty risk sug: subj: Public debts International economic integration Public Finance Activities Stabilization funds Risk sharing European Sovereign Debt Crisis, 2009-2018 Moral hazard Counterparty risk keyword: copyrightHolder:Review of Economic Studies Ltd copyrightYear:2026 Debt contracts Debt overhang Debt restructuring Fiscal unions inLanguage:en Limited enforcement Partnerships publisher:Oxford University Press Recursive contracts sameAs:https://dx.doi.org/10.1093/restud/rdaf076 Sovereign funds copyrightHolder:Review of Economic Studies Ltd copyrightYear:2026 Debt contracts Debt overhang Debt restructuring Fiscal unions inLanguage:en Limited enforcement Partnerships publisher:Oxford University Press Recursive contracts sameAs:https://dx.doi.org/10.1093/restud/rdaf076 Sovereign funds ab: We develop a model of a Financial Stability Fund (the "Fund" henceforth) for a union of sovereign countries. By design, the contract prevents country defaults, as well as undesired expected losses, which in a union translate into excessive risk mutualizations. A participant country has greater ability to borrow and share risks than using sovereign debt financing. The Fund contract also provides better incentives for the country to reduce endogenous risks. These efficiency gains arise from the ability of the Fund to offer long-term contingent financial contracts, subject to limited enforcement and moral hazard constraints. We develop the theory and quantitatively compare the constrained-efficient Fund economy with an incomplete markets economy with default. We calibrate our economy to the euro area "stressed countries" in the debt crisis (2010–2). Substantial welfare gains are achieved, particularly in times of crisis. The Fund is, in fact, a risk-sharing, crisis prevention and resolution mechanism, which transforms the participant countries' defaultable sovereign debt into the union's safe assets. In sum, our theory can help to improve current official lending practices and, for example, to eventually design a European Fiscal Fund. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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