Repatriation of Debt in the Euro Crisis

Filippo Brutti and Philip Sauré

Journal of the European Economic Association, 2016, vol. 14, issue 1, 145-174

Abstract: With the beginning of the Euro Crisis, the long-standing trend of European financial integration reversed. Investors unwound cross-border positions of debt obligations and increased holdings of locally issued debt. In other words, debt obligations were repatriated. We use data on bank portfolios to document three new empirical regularities of the financial disintegration: (i) repatriation affected mainly debt of crisis countries; (ii) repatriation affected mainly public debt; (iii) the public debt of crisis countries that was not repatriated was reallocated to large and politically influential countries within the Euro area. We read these results in light of standard theories of cross-border portfolio allocation and argue that the sum of these patterns constitutes evidence for the secondary market theory of public debt.

JEL-codes: F34 F36 G01 G11 G21 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (26)

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Journal Article: REPATRIATION OF DEBT IN THE EURO CRISIS (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:14:y:2016:i:1:p:145-174.

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