Sovereign bond purchases boost economic activity and resilience in monetary union.
The article evaluates how buying long-term government bonds by a central bank in a group of countries can help when the economy is struggling and interest rates are already very low. They used a model to study the effects in the euro area. The study found that when inflation goes down, it can make economic problems worse in different countries because of borrowing limits and low interest rates. Buying government bonds can boost the economy and help households reduce debt, making it easier for them to spend money and support the economy. This can help not only the country where the bonds are bought but also the whole group of countries using the same currency.