We propose a simple model of the sovereign-bank diabolic loop, and establish four results. First, the diabolic loop can be avoided by restricting banks' domestic sovereign exposures relative to their equity. Second, equity requirements can be lowered if banks only hold senior domestic sovereign...

We provide an empirical and theoretical analysis of the Greek Crisis of 2010. We first benchmark the crisis against all episodes of sudden stops, sovereign debt crises, and lending boom/busts in emerging and advanced economies since 1980. The decline in Greece's output, especially investment, is...

Introduction. The Greek economy before and during the crisis--and policy options going forward / Costas Meghir, Christopher A. Pissarides, Dimitri Vayanos, and Nikolaos Vettas -- The macroeconomics of the crisis. Greece and the Euro / George-Marios Angeletos and Harris Dellas ; The challenge of...