Euro Area: Towards a European Common Bond? – Empirical Evidence from the Sovereign Debt Markets

Abstract

Despite the debt crisis of the period 2010–15, the Eurozone did not manage to adopt an efficient policy for reinforcing the creation of a common bond among the members-states of the union. Under these circumstances, the research aim of this manuscript is to further explore the integration level of bond markets in the EMU after the end of the 2010 debt crisis and the potential creation of a Euro Area common bond. The empirical evidence we gathered is suggestive of a significant integration degree of bond markets in the Euro Area, whereas plenty of asymmetries exist among the member-states notwithstanding. The dominant role of France, the Netherlands, Germany, Italy, Ireland and Spain on the EA bond markets were unveiled. As a matter of fact, we propose that the EMU be conditionally prepared to issue a common Eurozone bond which will safeguard the financial stability in the monetary union.