Adopting the Euro affects a country's sovereign debt dynamics and risk profile
the verdict
SUPPORTED
the evidence backs this
confidence 85/100
Economic literature demonstrates that adopting a common currency alters sovereign debt dynamics, introducing distinct risk factors such as redenomination and default risk premia alongside varying vulnerability to debt crises.
Evidence for · 5
The Term Structure of Interest Rates in a Heterogeneous Monetary Union
2025 · cited by 42
The study models yield curves and sovereign default risk in a heterogeneous monetary union, showing how credit risk premiums shift within the euro area.
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More for · 4
Euro area sovereign bond risk premia before and during the Covid-19 pandemic
2023 · cited by 14
The research analyzes euro area sovereign bond yield components, demonstrating the distinct presence of default, redenomination, and liquidity risk premia.
SOVEREIGN DEBT CRISIS IN A MONETARY UNION: ACCOUNTING FOR EXCESSIVE DEBT, HOUSING BUBBLES, AND THE TRANSMISSION OF CRISES
2018 · cited by 6
The paper uses a growth model with collateral constraints in a monetary union to explain how peripheral economies become vulnerable to sovereign debt crises.
Sovereign Risk Premium and Divergent Fiscal Policies in a Monetary Union
2015 · cited by 4
The study examines sovereign risk premia and divergent fiscal policies within a monetary union, highlighting how asymmetric shocks increase long-term borrowing costs.
Asset Purchases in a Monetary Union with Default and Liquidity Risks
2024 · cited by 1
The research quantifies sovereign default and liquidity risks within a two-country monetary union framework, noting how market perceptions of fiscal solvency affect macroeconomic stability.