Bank capital, government bond holdings, and sovereign debt capacity *

• 成果类型: Article
• 署名作者: Crosignani, Matteo
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - New York
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.04.005
• 发表日期: 2021
• 页码: 693-704
• 关键词: Bank capital; Sovereign risk; Government Bonds; Bank-Sovereign Nexus

摘要

I develop a model where the sovereign debt capacity depends on the capitalization of do-mestic banks. Low-capital banks optimally tilt their government bond portfolio toward do-mestic securities, linking their destiny to that of the sovereign. If the sovereign risk is sufficiently high, low-capital banks lend less to the productive sector to further increase their holdings of domestic government bonds, lowering sovereign yields. In this case, a government that regulates bank capital faces a trade-off. On the one hand, high-capital banks lend more to the productive sector. On the other hand, low-capital banks support the home sovereign debt capacity. (c) 2021 Elsevier B.V. All rights reserved.