Arbeitspapier
Macroprudential Policy and the Sovereign-Bank Nexus in the Euro Area
We explore how changes in capital-based macroprudential regulation in the euro area affect the exposure of national banking sectors to domestic government debt, thus strengthening or weakening the sovereign-bank nexus. To do so, we construct a measure of macroprudential policy based on the Macroprudential Policy Evaluation Database (MaPPED) and estimate responses to the unsystematic component of macroprudential policy in panel vector autoregressive models for euro area "core" and "periphery" countries. Our main finding suggests that an unsystematic capital-based macroprudential policy tightening increases banks' exposure to domestic sovereign bonds in the periphery countries and thus deepens the sovereign-bank nexus. By contrast, banks in the core countries expand their loan portfolios, rather than adjusting their domestic sovereign bond holdings, in response to the shock. We show that this result can be tied to the theoretical literature and investigate several transmission channels. Our results are highly robust to changes in the econometric set-up and the macroprudential indicator used.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 9342
- Classification
-
Wirtschaft
Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
National Debt; Debt Management; Sovereign Debt
- Subject
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macroprudential policy
euro area
sovereign-bank nexus
panel vector autoregressive model
- Event
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Geistige Schöpfung
- (who)
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Hristov, Nikolay
Hülsewig, Oliver
Kolb, Benedikt
- Event
-
Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2021
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Hristov, Nikolay
- Hülsewig, Oliver
- Kolb, Benedikt
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2021
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