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Government debt and banking fragility: the spreading of strategic uncertainty

Gespeichert in:

Personen und Körperschaften: Cooper, Russell W. (VerfasserIn), Nikolov, Kalin (VerfasserIn)
Titel: Government debt and banking fragility: the spreading of strategic uncertainty/ Russell Cooper, Kalin Nikolov
Format: E-Book
Sprache: Englisch
veröffentlicht:
Frankfurt am Main, Germany European Central Bank [2018]
Gesamtaufnahme: Europäische Zentralbank: Working paper series ; no 2195 (November 2018)
Quelle: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Details
Zusammenfassung: 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.
Umfang: 1 Online-Ressource (circa 66 Seiten); Illustrationen
ISBN: 9789289933001
9289933003
DOI: 10.2866/888615