On a lender of last resort with a central bank and a stability Fund
研究了中央银行和金融稳定基金在稳定主权债务市场中的互补性，通过模型校准到意大利经济，发现最优债务期限为2.9年，所需基金容量为GDP的90%，但欧洲稳定机制可能无法完全吸收，需要欧洲央行干预。
We explore the complementarity between a central bank and a financial stability Fund in stabilizing sovereign debt markets. The central bank pursuing its mandate can intervene with public sector purchasing programs, buying sovereign debt in the secondary market, provided that the debt is safe. The sovereign sells its debt to private lenders, through market auctions. Furthermore, it has access to a long-term state-contingent contract with a Fund: a country-specific debt-and-insurance contract that accounts for no-default and no-over-lending constraints. The Fund needs to guarantee gross-financial-needs and no-over-lending. We show that these constraints endogenously determine the ‘optimal debt maturity’ structure that minimizes the Required Fund Capacity (RFC) to make all sovereign debt safe. However, the Fund may have limited absorption capacity and fall short of its RFC. The central bank may be able to cover the difference, in which case there is perfect complementarity and the joint institutions act as an effective ‘lender of last resort’. We calibrate our model to the Italian economy and find that with a Fund contract its ‘optimal debt maturity’ is 2.9 years with an RFC of 90% of GDP, which is above what the European Stability Mechanism (ESM) could reasonably absorb, but may be feasible with an ECB Transmission Protection Instrument (TPI) intervention. In contrast, the average maturity of Italian sovereign debt has been circa 6.2 years, with a needed absorption capacity of around 105% of GDP, which may call for a maturity restructuring to ease the activation of TPI.