Bálint Horváth, Harry Huizinga, Vasso P. Ioannidou, Friday, July 31, 2015 - 00:00

When banks invest heavily in sovereign debt, and in domestic sovereign debt in particular, the result is a debt home bias. This column presents evidence of a partially voluntary and partially involuntary sovereign debt home bias among large European banks. This bias is stronger if the sovereign is risky and shareholder rights are strong or the government has a positive ownership in the bank. Also, banks with a strong home bias are valued positively by the stock market.

Tamon Asonuma, Said Bakhache, Heiko Hesse, Saturday, July 4, 2015 - 00:00

Home bias in banks’ holdings of domestic government debt could pose problems for financial stability and crisis management. This column discusses some of the determinants of this bias. Factors that increase macroeconomic instability are associated with higher home bias, while better investment opportunities in the private sector and better institutional quality reduce home bias.

Urszula Szczerbowicz, Natacha Valla, Thursday, April 9, 2015 - 00:00

Michal Kobielarz, Burak Uras, Sylvester Eijffinger, Thursday, March 12, 2015 - 00:00

Sebastian Edwards, Wednesday, March 4, 2015 - 00:00

Lars P Feld, Christoph M Schmidt, Isabel Schnabel, Benjamin Weigert, Volker Wieland, Friday, February 20, 2015 - 00:00

Julio Escolano, Laura Jaramillo, Carlos Mulas-Granados, Gilbert Terrier, Friday, February 27, 2015 - 00:00

Luis Garicano, Lucrezia Reichlin, Friday, November 14, 2014 - 00:00

Irina Balteanu, Aitor Erce, Wednesday, November 12, 2014 - 00:00

S. M. Ali Abbas, Laura Blattner, Mark De Broeck, Asmaa El-Ganainy, Malin Hu, Monday, October 27, 2014 - 00:00

Carmen M Reinhart, Christoph Trebesch, Tuesday, October 21, 2014 - 00:00

Christopher Findlay, Silvia Sorescu, Camilo Umana Dajud, Friday, August 29, 2014 - 00:00

Jeffrey Frankel, Tuesday, July 22, 2014 - 00:00

The US court ruling forcing Argentina to pay its hold-out creditors has big implications. This column argues that some of them are particularly worrying. The court ruling undermines the possibility of negotiated re-structuring of unsustainable debt burdens in future crises. In the future, it will not be not enough for the debtor and 92% of creditors to reach an agreement, if holdouts and a New York judge can block it. This will make both debtors and creditors worse-off.

Nicola Gennaioli, Alberto Martin, Stefano Rossi, Saturday, July 19, 2014 - 00:00

There is growing concern – but little systematic evidence – about the relationship between sovereign default and banking crises. This column documents the link between public default, bank bondholdings, and bank loans. Banks hold many public bonds in normal times (on average 9% of their assets), particularly in less financially developed countries. During sovereign defaults, banks increase their exposure to public bonds – especially large banks, and when expected bond returns are high. At the bank level, bondholdings correlate negatively with subsequent lending during sovereign defaults.

Marcus Miller, Lei Zhang, Thursday, June 26, 2014 - 00:00

Like banks, indebted governments can be vulnerable to self-fulfilling financial crises. This column applies this insight to the Eurozone sovereign debt crisis, and explains why the ECB’s Outright Monetary Transactions policy reduced sovereign bond spreads in the Eurozone.

Paolo Manasse, Friday, January 31, 2014 - 00:00

Sales of state-owned assets have been proposed as a way for highly-indebted countries to ease the pain of fiscal consolidation. This column argues that, despite the potential merits of privatisation in terms of long-run efficiency, in practice it is unlikely to improve short-run fiscal solvency. Since governments rarely alienate control rights, the efficiency gains from privatisations are often small. Moreover, financial markets may not fully reflect these gains – particularly during a financial crisis. The implication is that the Troika policy of linking financial assistance to privatisations is inappropriate and self-defeating.

Charles Yuji Horioka, Takaaki Nomoto, Akiko Terada-Hagiwara, Tuesday, January 21, 2014 - 00:00

Japan’s sovereign debt-to-GDP ratio is higher than any country in Europe and more than twice the OECD average. This column explains why Japan’s massive government debt did not wreak havoc in the past. Robust domestic saving and a temporary inflow of foreign capital caused by the Global Crisis have prevented a crisis thus far. As both of these factors become less applicable the government faces pressure to reduce debt-to-GDP ratio can be brought under control quickly.

Willem Buiter, Friday, January 10, 2014 - 00:00

Fiscal sustainability has become a hot topic as a result of the European sovereign debt crisis, but it matters in normal times, too. This column argues that financial sector reforms are essential to ensure fiscal sustainability in the future. Although emerging market reforms undertaken in the aftermath of the financial crises of the 1990s were beneficial, complacency is not warranted. In the US, political gridlock must be overcome to reform entitlements and the tax system. In the Eurozone, creating a sovereign debt restructuring mechanism should be a priority.

Ashoka Mody, Tuesday, January 7, 2014 - 00:00

On 19 October 2010, Angela Merkel and Nicolas Sarkozy agreed that in future, sovereign bailouts from the European Stability Mechanism would require that losses be imposed on private creditors. This agreement was blamed for the increase in sovereign spreads in late 2010 and early 2011. This column discusses recent research on the market reaction to the surprise announcement at Deauville. With the exception of Greece, the rise in spreads was within the range of variability established in the previous 20 days.

Kaushik Basu, Joseph Stiglitz, Thursday, January 2, 2014 - 00:00

The Eurozone crisis exposed weaknesses in the Eurozone’s design. This column – by Nobelist Joe Stiglitz and World Bank Chief Economist Kaushik Basu – argues that the Eurozone’s financial architecture can be improved by amending the Treaty of Lisbon to permit appropriately structured cross-country liability for sovereign debt incurred by EZ members.


CEPR Policy Research