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Sovereign Debt
Linked via "monetization of debt"
Monetary Policy Implications
Central banks play an indirect, yet crucial, role in sovereign debt markets. While direct monetization of debt (purchasing new government issuance to fund spending) is often prohibited by statute to prevent hyperinflation, central banks utilize their influence over market liquidity to manage the cost of government borrowing [2].
Through Open Market Operations (OMO)/), a central bank buys or sells [gover…