Managing the sovereign-bank nexus
Luc Laeven (),
Camelia Minoiu () and
Alexander Popov ()
No 2177, Working Paper Series from European Central Bank
This paper identifies the various channels that give rise to a “sovereign-bank nexus” whereby the financial health of banks and sovereigns is intertwined. We find that banks and sovereigns are linked by three interacting channels: banks hold large amounts of sovereign debt; banks are protected by government guarantees; and the health of banks and governments affect and is affected by economic activity. Evidence suggests that all three channels are relevant. The paper concludes with a discussion of the policy implications of these findings. JEL Classification: E62, F34, G01, G21
Keywords: financial crisis; financial stability; fiscal policy; sovereign-bank nexus; sovereign risk (search for similar items in EconPapers)
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Working Paper: Managing the Sovereign-Bank Nexus (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20182177
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