Disaster risk in euro-area bond markets
The Sound of Economics
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Vulnerabilities in Sovereign Debt Markets
This chapter examines the vulnerabilities in sovereign debt markets, focusing on investor behavior during financial stress periods. It explores how loosely regulated investment entities can trigger rapid withdrawals, with an emphasis on the dynamics of the euro area and the impact of political risks on debt sustainability. The analysis reveals the complex interactions between different types of investors and highlights the emergence of 'doom loops' that exacerbate financial troubles in sovereign debt contexts.
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