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We analyse the poisonous interaction between bank rescues, financial fragility and sovereign debt discounts. In our … sovereign debt discount. We introduce long term government debt, which gives rise to the possibility of capital losses on bank … intermediaries causes bond prices to drop triggering capital losses at the bank under intervention. This mechanism shows the limits …
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This primer provides a detailed description of the GCF Repo ® Service, a financial service provided by the Fixed Income Clearing Corporation. The primer is composed of an introductory note and two separate papers. The first paper focuses on the clearance and settlement of GCF Repo. These...
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We develop a model of bank risk-taking with strategic sovereign default risk. Domestic banks invest in real projects … their default risks through purchases of bonds. But, for high debt levels, this influence is lost since bank and government …
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Using a DSGE framework, we discuss the optimal design of monetary policy for an economy where both retail banks and shadow banks serve as financial intermediaries. We get the following results. During crises times, a standard Taylor rule fails to reach sufficient stimulus. Direct asset purchases...
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