Banks, Government Bonds, and Default: What do the Data Say?

Nicola Gennaioli, Stefano Rossi and Martín, Alberto
Authors registered in the RePEc Author Service: Alberto Martin

No 10044, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: 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.

Keywords: Sovereign risk; Sovereign default; Government bonds (search for similar items in EconPapers)
JEL-codes: F34 F36 G15 H63 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (64)

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Related works:
Journal Article: Banks, government Bonds, and Default: What do the data Say? (2018)
Working Paper: Banks, government bonds, and default: what do the data say? (2017)
Working Paper: Banks, Government Bonds, and Default: what do the Data Say? (2016)
Working Paper: Banks, Government Bonds, and Default: What do the Data Say? (2014)
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