Deadly Embrace: Sovereign and Financial Balance Sheets Doom Loops

• Autores: Emmanuel Farhi, Jean Tirole
• Localización: Review of economic studies, ISSN 0034-6527, Vol. 85, Nº 3, 2018, págs. 1781-1823
• Idioma: inglés
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• Dialnet Métricas: 1 Cita
• Resumen

  • The recent unravelling of the Eurozone’s financial integration raised concerns about feedback loops between sovereign and banking insolvency. This article provides a theory of the feedback loop that allows for both domestic bailouts of the banking system and sovereign debt forgiveness by international creditors or solidarity by other countries. Our theory has important implications for the re-nationalization of sovereign debt, macroprudential regulation, and the rationale for banking unions.