The Invisible Hand of the Government: Moral Suasion during the European Sovereign Debt Crisis
By Steven R. G. Ongena, Alexander A. Popov, Neeltje van Horen. American Economic Journal: Macroeconomics, 2019
204 citations recorded by the source corpus.
Using proprietary data on banks’ monthly securities holdings, we show that during the European sovereign debt crisis, domestic banks in fiscally stressed countries were considerably more likely than foreign banks to increase their holdings of domestic sovereign bonds during months when the government needed to roll over a relatively large amount of maturing debt. This result cannot be explained by risk shifting, carry trading, or regulatory compliance. Domestic banks that received government support, are small, or with weaker balance sheets were particularly susceptible to “moral suasion,” while governance of banks played less of a role. (JEL D72, E62, G21, G28, H11, H63).
Subfields: Finance, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/12496681a1bb9f37db304aaa881026dd920243b7
Citations in the corpus
- Bank Exposures and Sovereign Stress Transmission (2017, unknown): “The idea is that the repricing of sovereign debt in stressed countries was external to the credit markets of non-stressed countries, and thus it can be viewed as an exogenous shock to loan supply in the latter, along the lines of Peek and Rosengren (2000); Klein, Peek, and Rosengren (2002); Chava an”
- Sovereign debt exposure and the bank lending channel: Impact on credit supply and the real economy (2020, unknown): “Previous evidence suggests that banks more connected with the government are systematically more likely to hold or purchase sovereign assets during periods of fiscal stress (Becker and Ivashina, 2014b; Ongena et al., 2018).”
- Debt Overhang, Rollover Risk, and Corporate Investment: Evidence from the European Crisis (2018, unknown): “Another possibility is though moral suasion, where governments force banks to hold risky government bonds as in Becker and Ivashina (2018), Altavilla et al. (2017) and in Ongena et al. (2017).”