The Invisible Hand of the Government: Moral Suasion during the European Sovereign Debt Crisis

Steven Ongena, Alexander Popov and Neeltje Van Horen ()

American Economic Journal: Macroeconomics, 2019, vol. 11, issue 4, 346-79

Abstract: Using proprietary data on banks' monthly securities holdings, we show that during the European sovereign debt crisis, domestic banks in fiscally stressed countries were considerably more likely than foreign banks to increase their holdings of domestic sovereign bonds during months when the government needed to roll over a relatively large amount of maturing debt. This result cannot be explained by risk shifting, carry trading, or regulatory compliance. Domestic banks that received government support, are small, or with weaker balance sheets were particularly susceptible to "moral suasion," while governance of banks played less of a role.

JEL-codes: D72 E62 G21 G28 H11 H63 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/mac.20160377
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Citations: View citations in EconPapers (102)

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Related works:
Working Paper: The invisible hand of the government: "Moral suasion" during the European sovereign debt crisis (2016)
Working Paper: The invisible hand of the government: “Moral suasion” during the European sovereign debt crisis (2016)
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