Banks, government Bonds, and Default: What do the data Say?
By N. Gennaioli, Alberto Martin, Stefano Rossi. Journal of Monetary Economics, 2014
216 citations recorded by the source corpus.
We analyze holdings of public bonds by over 20,000 banks in 191 countries, and the role of these bonds in 20 sovereign defaults over 1998-2012. Banks hold many public bonds (on average 9% of their assets), particularly in less financially-developed countries. During sovereign defaults, banks increase their exposure to public bonds, especially large banks and when expected bond returns are high. At the bank level, bondholdings correlate negatively with subsequent lending during sovereign defaults. This correlation is mostly due to bonds acquired in pre-default years. These findings shed light on alternative theories of the sovereign defaultbanking crisis nexus.
Subfields: Finance
View Paper: https://www.semanticscholar.org/paper/d9175aab4484e07c82cea51a20bb39dee46bb1b9
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Citations in the corpus
- The Invisible Hand of the Government: Moral Suasion during the European Sovereign Debt Crisis (2019, unknown): “Our paper most directly relates to the recent literature on the sovereign-bank “doom loop” (Acharya et al., 2014; Farhi and Tirole, 2018; Gennaioli et al., 2014a).”
- Sovereign defaults and banking crises (2018, background): “A more recent empirical study by Gennaioli et al. (2016) reports an average exposure ratio of 9.3% when using granular data from Bankscope (which includes banks from both advanced and developing countries).”
- Debt Overhang, Rollover Risk, and Corporate Investment: Evidence from the European Crisis (2018, unknown): “Papers such as Martin and Philippon (2017) and Gopinath et al. (2017) show the important role of debt accumulation during the boom years for the investment and productivity decline.”
- Bank Exposures and Sovereign Stress Transmission (2017, unknown): “…defaults reduce private lending by undermining the balance sheets of domestic banks, the more so the larger their holdings of government debt, and test these predictions on crosscountry evidence; they also test them on bank-level data in a companion paper (Gennaioli, Martin, and Rossi, 2014b).”
- Financial Repression in the European Sovereign Debt Crisis (2017, unknown): “Gennaioli, Martin, and Rossi (2014) find that information on sovereign holdings in Bankscope is highly comparable to the information collected through stress testing.”
- The Pass-Through of Sovereign Risk (2016, methodology): “Motivated by robust empirical evidence, Sosa Padilla (2013), Gennaioli, Martin, and Rossi (2014b), and Perez (2015) study the effects of sovereign defaults on domestic banks and the impact that the associated output losses have on the government’s incentives to default.2 My research is…”