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A behavioural model of European bond markets

  • This paper builds a new theory of euro area sovereign bond markets. The theory explains the anomalous bond pricing and increasing spreads during the ‘Euro-Crisis’. I show that the malfunctioning of euro area bond markets is triggered by asymmetric information and weak reputation in economic and fiscal policy. Both factors trigger a Standard bond market to turn into turmoil. In the end, those markets are prone to self-fulfilling bubbles due to animal Spirits. Consequently, mispricing of sovereign debt is inherent in the Eurozone and creates more macroeconomic instability than in a stand-alone country.

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Metadaten
Name:Herzog, Bodo
URN:urn:nbn:de:bsz:rt2-opus4-517
DOI:https://doi.org/10.4172/2168-9458.1000126
eISSN:2168-9458
Erschienen in:Journal of Stock and Forex Trading
Publisher:Omics International
Document Type:Article
Language:English
Year of Publication:2014
Tag:Bond market; Euro area; Euro crisis; G12; JEL-Code
Volume:3
Issue:3
Pagenumber:4
Dewey Decimal Classification:330 Wirtschaft
Open Access:Ja