I develop a model where the sovereign debt capacity depends on the capitalization of domestic banks. Low-capital banks … the sovereign risk is sufficiently high, low-capital banks reduce private lending to further increase their holdings of …, in the context of the eurozone periphery, the increase in domestic government bond holdings, the reduction of bank credit …

We empirically examine the Capital Purchase Program (CPP) used by the US gov- ernment to bail out distressed banks with … equity infusions during the Great Recession. We find strong evidence that a feature of the CPP – the government’s ability to …

--on average, they occur every five years. By comparison, banking crises take place every eight years on average. Credit reversals …This paper studies episodes in which aggregate bank credit contracts alongside expanding economic activity-credit … and banking crises also appear related to each other: reversals become more likely in the aftermath of banking crises …