If I, as an investor, don’t anticipate that others will buy into the debt issue, I won’t either. In this sense, sovereign debt issues may be susceptible to suboptimal “runs.” The CB can eliminate this possibility by ensuring the nominal promises of the FA whenever the FA is threatened with default. Thus, I see trade-offs.
On the one hand, if the CB is known to be willing to intervene to keep the FA solvent, then inflation is necessarily shaped by fiscal considerations and by the shortrun incentives of elected officials. We know from many years of theoretical and empirical research that this effect is not a desirable one.