Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175691 
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper No. 2067
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper studies the effects of government guarantees on the interconnection between banking and sovereign debt crises in a framework where both the banks and the government are fragile and the credibility and feasibility of the guarantees are determined endogenously. The analysis delivers some new results on the role of guarantees in the bank-sovereign nexus. First, guarantees emerge as a key channel linking banks' and sovereign stability, even in the absence of banks' holdings of sovereign bonds. Second, depending on the specific characteristics of the economy and the nature of banking crises, an increase in the size of guarantees may be beneficial for the bank-sovereign nexus, in that it enhances financial stability without undermining sovereign solvency.
Subjects: 
bank runs
sovereign default
strategic complementarity
government bond yield
JEL: 
G01
G18
H63
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2789-5
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.