Banks, sovereign risk and unconventional monetary policies

Stéphane Auray, Aurélien Eyquem and Xiaofei Ma

European Economic Review, 2018, vol. 108, issue C, 153-171

Abstract: We develop a two-country model with an explicitly microfounded interbank market and sovereign default risk. Calibrated to the core and the periphery of the Euro Area, the model gives rise to a debt-banks-credit loop that substantially amplifies the effects of financial shocks, especially for the periphery. We use the model to investigate the effects of a stylized public asset purchase program at the steady state and during a crisis. We find that it is more effective in stimulating the economy during a crisis, in particular for the periphery.

Keywords: Recession; Interbank market; Sovereign default risk; Asset purchases (search for similar items in EconPapers)
JEL-codes: E32 E44 E58 F34 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2018)
Working Paper: Banks, sovereign risk and unconventional monetary policies (2018)
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2018)
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2017)
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2016)
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2016)
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2015)
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:108:y:2018:i:c:p:153-171

DOI: 10.1016/j.euroecorev.2018.07.002

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