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Bank sovereign bond holdings, sovereign shock spillovers, and moral hazard during the European crisis

Beltratti, Andrea - 2015

From 2010 to 2012, the relation between bank stock returns from European Union (EU) countries and the returns on sovereign CDS of peripheral (GIIPS) countries is negative. We use days with tail sovereign CDS returns of peripheral countries to identify the effects of shocks to the cost of...

Persistent link: https://www.econbiz.de/10012457516

Internal Debt Crises and Sovereign Defaults

Arellano, Cristina - 2008

In this paper, we use data from developing countries to argue that sovereign defaults are often caused by fiscal pressures generated by large-scale domestic defaults. We argue that these systemic domestic defaults are caused by shocks best interpreted as being non-fundamental. We construct a...

Persistent link: https://www.econbiz.de/10012464852

Quantitative Sovereign Default Models and the European Debt Crisis

Bocola, Luigi - 2018

A large literature has developed quantitative versions of the Eaton and Gersovitz (1981) model to analyze default episodes on external debt. In this paper, we study whether the same framework can be applied to the analysis of debt crises in which domestic public debt plays a prominent role. We...

Persistent link: https://www.econbiz.de/10012480634

History Remembered : Optimal Sovereign Default on Domestic and External Debt

D'Erasmo, Pablo N. - 2018

. Calibrated to Eurozone data, the model is consistent with key long-run and debt-crisis statistics. Defaults are rare (1.2 percent …

Persistent link: https://www.econbiz.de/10012480724

Monetary Independence and Rollover Crises

Bianchi, Javier - 2018

This paper shows that the inability to use monetary policy for macroeconomic stabilization leaves a government more vulnerable to a rollover crisis. We study a sovereign default model with self-fulfilling rollover crises, foreign currency debt, and nominal rigidities. When the government lacks...

Persistent link: https://www.econbiz.de/10012480991

Is It Too Late to Bail Out the Troubled Countries in the Eurozone?

Conesa, Juan Carlos - 2014

Central Bank, and International Monetary Fund) organize similar bailouts for the troubled countries in the Eurozone? Our … analysis suggests that debt levels are so high that bailouts with penalty interest rates could induce the Eurozone governments … to default rather than reduce their debt. A resumption of economic growth is one of the few ways that the Eurozone crises …

Persistent link: https://www.econbiz.de/10012458755

Linkages across Sovereign Debt Markets

Arellano, Cristina - 2013

We develop a multicountry model in which default in one country triggers default in other countries. Countries are linked to one another by borrowing from and renegotiating with common lenders with concave payoffs. A foreign default increases incentives to default at home because it makes new...

Persistent link: https://www.econbiz.de/10012459113

Distributional Incentives in an Equilibrium Model of Domestic Sovereign Default

D'Erasmo, Pablo - 2013

Europe's debt crisis resembles historical episodes of outright default on domestic public debt about which little research exists. This paper proposes a theory of domestic sovereign default based on distributional incentives affecting the welfare of risk-averse debt- and non-debt holders. A...

Persistent link: https://www.econbiz.de/10012459185

Sovereign Default Risk and Banks in a Monetary Union

Uhlig, Harald - 2013

This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank, and that their sovereign partially backs up any...

Persistent link: https://www.econbiz.de/10012459318

The Mystique Surrounding the Central Bank's Balance Sheet, Applied to the European Crisis

Reis, Ricardo - 2013

In spite of the mystique behind a central bank's balance sheet, its resource constraint bounds the dividends it can distribute by the present value of seignorage, which is a modest share of GDP. Moreover, the statutes of the Federal Reserve or the ECB make it difficult for it to redistribute...

Persistent link: https://www.econbiz.de/10012459932