Intertwined Sovereign and Bank Solvencies in a Model of Self-Fulfilling Crisis.
Title:
Intertwined Sovereign and Bank Solvencies in a Model of Self-Fulfilling Crisis.
Author:
Adler, Gustavo.
ISBN:
9781475548419
Personal Author:
Physical Description:
1 online resource (30 pages)
Series:
IMF Working Papers
Contents:
Cover -- Contents -- 1. Introduction -- 2. Model -- 2.1 Households -- 2.2 Domestic Financial Intermediaries -- 2.3 Firms -- 2.4 Government -- 2.5 A Competitive Equilibrium -- 2.6 A Sustainable Debt Equilibrium -- 2.7 A Self-Fulfilling Crisis -- 3. Discussion -- 3.1 Senior Debt Structure -- 3.2 Capital Requirements -- 3.3 Public Recapitalization -- 4. Conclussions -- Figures -- 1. Equilibria at Time t -- 2. Equilibria with Different Levels of Domestic Debt -- 3. Probability of Crisis and Effect on Prices, Private Credit and Output -- Appendix -- References.
Abstract:
Large fiscal financing needs, both in advanced and emerging market economies, have often been met by borrowing heavily from domestic banks. As public debt approached sustainability limits in a number of countries, however, high bank exposure to sovereign risk created a fragile inter-dependence between fiscal and bank solvency. This paper presents a simple model of twin (sovereign and banking) crisis that stresses how this interdependence creates conditions conducive to a self-fulfilling crisis.
Local Note:
Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2017. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.
Genre:
Electronic Access:
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