The main objective of this research is first to explore the interaction between the monetary policy of the European Central Bank (ECB) and the dynamics of public debt in individual member states of the monetary union (indeed the Eurozone is a monetary union with heterogeneous countries), this means that the ECB holds bonds from different countries with varying levels of risk.

Additionally, any monetary policy decision has different effects on different states. Therefore, through this analysis, the objective is also to have a starting point on which analyze who benefitted more from Asset Purchases (likely Italy or Spain?) and who bore the costs (likely Germany and Northern Europe?) and, more general, what are the consequences for "fragmentation", which is the classic justification that the ECB uses for implementing these balance sheet policies.

These are crucial aspects for comprehending the broader implications of the ECB's actions within the Eurozone. Specifically, I aim to assess the feedback effect that monetary policy may have on the default risk of a member state, considering the heterogeneity in the composition of the ECB's assets due to varying default risk levels among member states. We expect that this research will provide a clearer perspective on the challenges and opportunities that the ECB must consider when making monetary policy decisions, to balance the financial stability of the Union with the need to maintain adequate control over inflation and economic growth.