Financial stability indicators and public debt developments

Athanasios Tagkalakis

No 179, Working Papers from Bank of Greece

Abstract: This paper investigates the inter-linkages between financial stability and fiscal policy. It analyzes the effect of selected financial stability indicators on the probability of future debt deterioration, controlling for several macroeconomic variables. We find significant evidence that a fragile banking system can put at risk public finances. Weak bank profitability, low asset quality and a weak capital base increase the fragility of the banking system, thus, raising the probability of future fiscal troubles.

Keywords: Bank profitability; capital adequacy; asset quality; fiscal policy (search for similar items in EconPapers)
JEL-codes: E32 E44 E58 E61 E62 G21 G28 H61 H62 (search for similar items in EconPapers)
Pages: 66
Date: 2014-04
New Economics Papers: this item is included in nep-ban, nep-eec and nep-mac
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Citations: View citations in EconPapers (15)

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Journal Article: Financial stability indicators and public debt developments (2014)
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