Arbeitspapier
Government debt and banking fragility: The spreading of strategic uncertainty
This paper studies the interaction of government debt and financial markets. This interaction, termed a "diabolic loop", is driven by government choice to bail out banks and the resulting incentives for banks to hold government debt rather than self-insure through equity buffers. We highlight the role of bank equity issuance in determining whether the "diabolic loop" is a Nash Equilibrium of the interaction between banks and the government. When equity is issued, no diabolic loop exists. In equilibrium, banks' rational expectations of a bailout ensure that no equity is issued and the sovereign-bank loop is operative.
- ISBN
-
978-92-899-3300-1
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Working Paper ; No. 2195
- Klassifikation
-
Wirtschaft
Financial Crises
Financial Institutions and Services: Government Policy and Regulation
Financial Markets and the Macroeconomy
- Thema
-
Sovereign default
Sovereign-banking loop
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Cooper, Russell W.
Nikolov, Kalin
- Ereignis
-
Veröffentlichung
- (wer)
-
European Central Bank (ECB)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2018
- DOI
-
doi:10.2866/888615
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Cooper, Russell W.
- Nikolov, Kalin
- European Central Bank (ECB)
Entstanden
- 2018
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