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A Pyrrhic Victory? - Bank Bailouts and Sovereign Credit Risk
Acharya, Viral V. - 2011
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 …
Persistent link: https://www.econbiz.de/10012461522
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The Economics of Sovereign Debt, Bailouts and the Eurozone Crisis
Gourinchas, Pierre-Olivier - 2020
Despite a formal 'no-bailout clause', we estimate significant net present value transfers from the European Union to … recent Eurozone crisis. We propose a model to analyze and understand bailouts in a monetary union, and the large observed … differences across countries. We characterize bailout size and likelihood as a function of the economic fundamentals (economic …
Persistent link: https://www.econbiz.de/10012481598
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Debt Fragility and Bailouts
Cooper, Russell - 2012
This paper studies debt fragility and the sharing of the resulting strategic uncertainty through ex post bailouts. Default arises in equilibrium because of both fundamental shocks and beliefs. The probability of default depends on borrowing rates and, in equilibrium, on the beliefs of lenders...
Persistent link: https://www.econbiz.de/10012460282
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Kicking the Can Down the Road : Government Interventions in the European Banking Sector
Acharya, Viral V. - 2020
We analyze the determinants and the long-run consequences of government interventions in the eurozone banking sector … an econometric approach that addresses the endogeneity associated with governmental bailout decisions in identifying …
Persistent link: https://www.econbiz.de/10012481392
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Credit Ratings and the Pricing of Sovereign Debt during the Euro Crisis
Aizenman, Joshua - 2013
This paper investigates the impact of credit rating changes on the sovereign spreads in the European Union and investigates the macro and financial factors that account for the time varying effects of a given credit rating change. We find that changes of ratings are informative, economically...
Persistent link: https://www.econbiz.de/10012459536
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Credit Default Swaps and the Credit Crisis
Stulz, René M. - 2009
Many observers have argued that credit default swaps contributed significantly to the credit crisis. Of particular concern to these observers are that credit default swaps trade in the largely unregulated over-the-counter market as bilateral contracts involving counterparty risk and that they...
Persistent link: https://www.econbiz.de/10012463266
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AIG in Hindsight
McDonald, Robert L. - 2015
The near-failure on September 16, 2008, of American International Group (AIG) was an iconic moment in the financial crisis. Two large bets on real estate made with funding that was vulnerable to bank-run like behavior on the part of funders pushed AIG to the brink of bankruptcy. AIG used...
Persistent link: https://www.econbiz.de/10012457558
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A Model of Safe Asset Determination
He, Zhiguo - 2016
What makes an asset a "safe asset"? We study a model where two countries each issue sovereign bonds to satisfy investors' safe asset demands. The countries differ in the float of their bonds and their resources/fundamentals available to rollover debts. A sovereign's debt is more likely to be...
Persistent link: https://www.econbiz.de/10012456404
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External and Public Debt Crises
Arellano, Cristina - 2015
The recent debt crises in Europe and the U.S. states feature similar sharp increases in spreads on government debt but also show important differences. In Europe, the crisis occurred at high government indebtedness levels and had spillovers to the private sector. In the United States, state...
Persistent link: https://www.econbiz.de/10012457212
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Information Spillovers and Sovereign Debt : Theory Meets the Eurozone Crisis
Cole, Harold L.; Neuhann, Daniel; Ordoñez, Guillermo - National Bureau of Economic Research - 2022
primary and secondary market yields, market segmentation, and measures of information acquisition during the Eurozone …
Persistent link: https://www.econbiz.de/10013334434