Banking regulation routinely designates some assets as safe and thus does not require banks to hold any additional capital to protect against losses from these assets. A typical such safe asset is domestic government debt. There are numerous examples of banking regulation treating domestic...

The second chapter aims to calculate maximum sustainable debt ratios in advanced economies. We estimate a model based on countries' economic fundamentals. The model incorporates feedback effects between interest rates and debt ratios, allows for multi-period debt and considers different fiscal...