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We develop a model of bank risk-taking with strategic sovereign default risk. Domestic banks invest in real projects … government's incentives to repay and therefore lowers its borrowing costs. For low levels of government debt, banks influence … default are perfectly correlated. Banks fail to account for how their bond purchases influence the government's default …
Persistent link: https://www.econbiz.de/10012301195
-level drivers of this relationship. We find that banks' home bias in their sovereign exposures and their low equity ratios as well …-bank nexus. While these results do not necessarily reflect causal relationships, they suggest that promoting banks …
Persistent link: https://www.econbiz.de/10011559528
In this paper, we use detailed data on the sovereign debt holdings of all German banks to analyse the determinants of …, sovereign bond holdings are heterogeneous across banks. Larger, weakly capitalised banks and banks with a small depositor base … hold more sovereign bonds. Around 31% of all German banks hold no sovereign bonds at all. Second, the sensitivity of banks …
Persistent link: https://www.econbiz.de/10012988769
I propose a dynamic general equilibrium model in which strategic interactions between banks and depositors may lead to … endogenous bank fragility and slow recovery from crises. When banks' investment decisions are not contractible, depositors form … complementarities and possibly multiple equilibria: in response to an increase in funding costs, banks may optimally choose to pursue …
Persistent link: https://www.econbiz.de/10011978544
We develop a model of bank risk-taking with strategic sovereign default risk. Domestic banks invest in real projects … government's incentives to repay and therefore lowers its borrowing costs. For low levels of government debt, banks influence … default are perfectly correlated. Banks fail to account for how their bond purchases influence the government's default …
Persistent link: https://www.econbiz.de/10013315138
Since the onset of the eurozone sovereign debt crisis, credit risk spreads in Europe have diverged. Despite this divergence, credit risk comoves strongly within certain country groups such as the eurozone periphery. We seek to answer what the determinants of the observed pattern of credit risk...
Persistent link: https://www.econbiz.de/10010486057
We study sovereign external debt crises over the past 200 years, with a focus on creditor losses, or "haircuts". Our sample covers 327 sovereign debt restructurings with external private creditors over 205 default spells since 1815. Creditor losses vary widely (from none to 100%), but the...
Persistent link: https://www.econbiz.de/10014557831
extend and the foreign claims that banks extend via local affiliates primarily drive the impact. These results show that the …
Persistent link: https://www.econbiz.de/10012205746
Using a novel dataset on central bank interventions to financial institutions, we examine the impact of capital injection announcements on systemic risk for the banking sector in the U.S. and the euro area between 2008 and 2013. We propose a new measure of options-based systemic risk called...
Persistent link: https://www.econbiz.de/10014121074
Euro area governments have committed to break the doom loop between banks and sovereigns. But policymakers disagree on … reallocation by banks in response to regulatory reform. Simulations highlight a tension between concentration and credit risk in … opportunity set to include an area-wide low-risk asset. By reinvesting into such an asset, banks would reduce both their …
Persistent link: https://www.econbiz.de/10012061145