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 …

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

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 …

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 …

Motivated by public policy debates about bank consolidation and conflicting theoretical predictions about the … relationship between the market structure of the banking industry and bank fragility, this paper studies the impact of bank … concentration, bank regulations, and national institutions on the likelihood of suffering a systemic banking crisis. Using data on …

Economic theories posit that bank liability insurance is designed as serving the public interest by mitigating systemic … private interests of banks, bank borrowers, and depositors, potentially at the expense of the public interest. Empirical …-through subsidy targeted to particular classes of bank borrowers …

simple model where, even ignoring interconnectedness issues, the failure of a bank causes a larger welfare loss than the … banks, and the size of this response should be larger if a bank, rather than a similarly-sized nonfinancial firm, fails …

accounting for loan portfolios held to maturity. Marked-to-market bank assets have declined by an average of 10% across all the …-- unlike insured depositors, uninsured depositors stand to lose a part of their deposits if the bank fails, potentially giving … them incentives to run. A case study of the recently failed Silicon Valley Bank (SVB) is illustrative. 10 percent of banks …

" bank-distress episodes …