We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy …-financial sector to fund the bailout may be inefficient since it weakens its incentive to invest, decreasing growth. Instead, the … sovereign may choose to fund the bailout by diluting existing government bondholders, resulting in a deterioration of the …

repayments (default). Firms in Italy defaulted more against banks with high levels of past losses. We control for borrower … fundamentals with firm-quarter fixed effects; thus, identification comes from a firm's choice to default against one bank versus … bank relationships comes into doubt …

failure of one bank may lead to others. Earlier work had suggested that, provided shocks were not too large (or too correlated …

international credit markets: bailout guarantees and the imperfect enforceability of contracts. The interaction of these distortions …

We examine banking regulation in a macroeconomic model of bank runs. We construct a general equilibrium model where …

financial sector. We show that bank size, purely on strategic grounds, is a key determinant of banks' leverage choices, even … when bailout policies treat large and small banks symmetrically. Large banks always take on more leverage than small banks … because they internalize that their decisions directly affect the government's optimal bailout policy. In equilibrium, small …

This paper investigates the impact on bank stock prices of emerging market currency crises and bailouts. The stock … events in countries experiencing a crisis. The paper uses the impact of the LTCM crisis on bank stock prices to put the …

crises feature a feedback loop between bank guarantees and bank holdings of local sovereign debt thereby linking financial to …