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The court cannot preclude the ECB and other national central banks from doing it, and the only country to suffer if the Bundesbank stopped participating would be Germany, writes Matthias Weber

Using an integrated epi-econ model, we compute the value of vaccines for Covid-19, both under a planner’s solution and in competitive equilibrium. The specific model, developed in Boppart, Harmenberg, Hassler, Krusell, and Olsson (2020), factors in not just value-of-life aspects along with standard economic variables but also the value of leisure activities that rely on a social component. We find that the societal value of vaccination is large; we estimate that, translated into monetary terms, the value of vaccinating one young individual in the competitive equilibrium is $17,800. Externalities are large: less than half the societal value is internalized by individuals (assuming that they act purely in their self-interest). Finally, behavioral responses are important, with a substantial share of the value of vaccines being attributed to people enjoying more socially-oriented leisure when more people are vaccinated.

Well-designed eurobonds would lower financing costs for many euro area countries while hardly or not increasing the costs for the others. These bonds should have an explicit guarantee from the ECB. The bonds could be used up to a limit of GDP (a low number of 10-25% of GDP would allow to observe market reactions before deciding whether to expand). Their introduction would increase the costs on regular German 10-year bonds by at most 10 to 30 basis points.

It is often believed that markets with more experienced investors exhibit fewer bubbles. The same is believed of markets where investors have additional information about fundamentals. Anita Kopányi-Peuker and Matthias Weber provide evidence that these beliefs are not necessarily true. In contrast, bubbles may rise faster in markets with more experienced investors. This is in line with a model in which naïve investors extrapolate trends, which sophisticated investors take into account when making decisions.

Less economic integration would make it difficult for the ECB to stabilise the euro area economies. Symmetric monetary policy cannot do anything about this and individual countries would need to use fiscal policy tools.