Abstract

http://ssrn.com/abstract=2429767
 


 



Financial Repression in the European Sovereign Debt Crisis


Bo Becker


Swedish House of Finance

Victoria Ivashina


Harvard University; National Bureau of Economic Research (NBER)

April 25, 2014

Swedish House of Finance Research Paper No. 14-13

Abstract:     
By the end of 2013, the share of government debt held by the domestic banking sectors of Eurozone countries was more than twice its 2007 level. We show that this type of increasing reliance on the domestic banking sector for absorbing government bonds generates a crowding out of corporate lending. For a given domestic firm, new debt is less likely to be a loan — i.e., the loan supply contracts — when local banks have purchased more domestic sovereign debt and when that debt is risky (as measured by CDS spreads). These effects are most pronounced in the period following the second Greek bailout in early 2010.

Number of Pages in PDF File: 49

Keywords: Credit Cycles, Sovereign Debt, Financial Repression

JEL Classification: G11, G22, G30

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Date posted: April 27, 2014 ; Last revised: June 27, 2014

Suggested Citation

Becker, Bo and Ivashina, Victoria, Financial Repression in the European Sovereign Debt Crisis (April 25, 2014). Swedish House of Finance Research Paper No. 14-13. Available at SSRN: http://ssrn.com/abstract=2429767 or http://dx.doi.org/10.2139/ssrn.2429767

Contact Information

Bo Becker
Swedish House of Finance ( email )
Drottninggatan 98
111 60 Stockholm
Sweden

Victoria Ivashina (Contact Author)
Harvard University ( email )
Harvard Business School
Baker Library 233
Boston, MA 02163
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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