Potential Perils in Bonds of European Countries' Economies
In a recent episode of The Sound of Economics, host Rebecca Christie delved into the complex dynamics shaping the euro-area bond markets with ECB Senior Economist Christoph Kaufmann and Stavros Zenios from the website. The discussion centred around two groundbreaking studies: "Incorporating political risk into analysis of sovereign debt sustainability" by Ajovalasit et al. (2024) and "Investment funds and euro disaster risk" by Anaya Longaric et al. (2025), both published at the European Central Bank.
These studies focus on the impact of political risk on sovereign debt sustainability and the behaviour of investment funds in euro-area bond markets. The findings may contribute to a better understanding of why investment funds react differently to fiscal and political shocks compared to other investor groups.
The conversation addressed the consequences for both periphery and core countries in the euro area. The studies also touch upon the disciplining role of markets, the sustainability of public debt, and the need for a euro-area safe asset, all of which are crucial topics in the current economic landscape.
The studies by Ajovalasit et al. (2024) and Anaya Longaric et al. (2025) are likely to provide valuable insights into the interplay between disaster risk, political instability, and investor behaviour in euro-area bond markets. However, the authors who collaborated with Christoph Kaufmann on these works are not explicitly mentioned in the available search results.
The episode highlights the importance of understanding these dynamics, as they could potentially inform policymakers and market participants about the risks and opportunities in euro-area bond markets. As the euro area continues to evolve, these studies offer a valuable perspective on the role of political risk, investor behaviour, and market discipline in shaping the region's financial landscape.
