Title:
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Banks, Government Bonds, and Default: What do the Data Say?
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Author:
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Gennaioli, Nicola; Martin, Alberto; Rossi, Stefano
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Abstract:
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This paper analyzes sovereign bondholdings by 20,000 banks in 191 countries and 20 sovereign default episodes over 1998–2012, establishing two robust facts. First, banks hold many government bonds (on average 9% of assets) in normal times, particularly banks making fewer loans and operating in less financially-developed countries. Second, during default years, banks with the average exposure to government bonds exhibit a lower growth rate of loans than banks without bonds (7-percentage points lower). These results indicate that the “dangerous embrace” between banks and their government plays a key role during sovereign defaults and its strength depends on local conditions. |
Abstract:
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Gennaioli thanks the European Research Council (grant ERC-GA 241114). Martin acknowledges support from the European Research Council (Consolidator Grant FP7-615651-MacroColl), the Spanish Ministry of Science and Innovation (grant Ramon y Cajal RYC-2009-04624), the Spanish Ministry of Economy and Competitivity (grant ECO2011-23192), the Generalitat de Catalunya-AGAUR (grant 2009SGR1157), the Ramón Areces Grant and the IMF Research Fellowship. |
Subject(s):
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-Sovereign Risk -Sovereign Default -Government Bonds |
Rights:
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© 2018 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license.
https://creativecommons.org/licenses/by-nc-nd/4.0/
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Document type:
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Article Article - Published version |
Published by:
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Elsevier
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