Banks, government Bonds, and Default: What do the data Say?

Nicola Gennaioli, Alberto Martin and Stefano Rossi

Journal of Monetary Economics, 2018, vol. 98, issue C, 98-113

Abstract: This paper analyzes sovereign bondholdings by 20,000 banks in 191 countries and 20 sovereign default episodes over 1998–2012, establishing two robust facts. First, banks hold many government bonds (on average 9% of assets) in normal times, particularly banks making fewer loans and operating in less financially-developed countries. Second, during default years, banks with the average exposure to government bonds exhibit a lower growth rate of loans than banks without bonds (7-percentage points lower). These results indicate that the “dangerous embrace” between banks and their government plays a key role during sovereign defaults and its strength depends on local conditions.

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: 2018
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Citations: View citations in EconPapers (91)

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Related works:
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)
Working Paper: Banks, Government Bonds, and Default: What do the Data Say? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:98:y:2018:i:c:p:98-113

DOI: 10.1016/j.jmoneco.2018.04.011

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