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Author: Mr.Giovanni Dell'Ariccia
Publisher: International Monetary Fund
ISBN: 1484359623
Category : Business & Economics
Languages : en
Pages : 54
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Book Description
This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
Author: Mr.David Hauner
Publisher: International Monetary Fund
ISBN: 1451865651
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
References to policy credibility, particularly with regard to fiscal policy, are ubiquitous in both economic literature and financial markets, even though it is not directly observable. The case of the EU new member states (NMS)-emerging markets joining a supranational entity that is generally considered to have higher policy credibility-provides a unique experiment to assess the effects of credibility on sovereign credit. This paper examines the impact of EU accession on three key variables that can reflect in varying degrees policy credibility: sovereign ratings, foreign currency spreads, and local currency yields. The results suggest that the NMS appear to have enjoyed higher credibility compared to their peers.
Author: Mr.Giovanni Dell'Ariccia
Publisher: International Monetary Fund
ISBN: 1484359623
Category : Business & Economics
Languages : en
Pages : 54
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Book Description
This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
Author: Ms.Eva Jenkner
Publisher: International Monetary Fund
ISBN: 1484399137
Category : Business & Economics
Languages : en
Pages : 29
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Book Description
Studies have shown that markets may underprice sub-national governments’ risk on the implicit assumption that these entities would be bailed out by their central government in case of financial difficulties. However, the question of whether sovereigns pay a premium on their own borrowing as a result of (implicitly or explicitly) guaranteeing sub-entities’ debt has been explored only little. We use an event study approach with separate equations for two levels of government to test for a simultaneous increase in sovereign risk premia and decrease in sub-national risk premia—or a de facto transfer of risk from the latter to the former—on the day a sovereign bailout is announced. Using daily financial market data for Spain and its autonomous regions from January 2010 to June 2013, we find support for our risk transfer hypothesis. We estimate that the Spanish sovereign’s spread may have increased by around 70 basis points as a result of the central government’s support for fiscally distressed comunidades autónomas.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1498342434
Category : Business & Economics
Languages : en
Pages : 88
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Book Description
This paper explores how banking sector developments and characteristics influence the propagation of risks from the banking sector to sovereign debt, including how they affect the extent of fiscal costs of banking crises when those occur. It then proposes practices and policies for the fiscal authorities to help manage the risks and enhance crisis preparedness.
Author: Odette Lienau
Publisher: Harvard University Press
ISBN: 0674726405
Category : Business & Economics
Languages : en
Pages : 342
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Book Description
Conventional wisdom holds that all nations must repay debt. Regardless of the legitimacy of the regime that signs the contract, a country that fails to honor its obligations damages its reputation. Yet should today's South Africa be responsible for apartheid-era debt? Is it reasonable to tether postwar Iraq with Saddam Hussein's excesses? Rethinking Sovereign Debt is a probing analysis of how sovereign debt continuity--the rule that nations should repay loans even after a major regime change, or else expect consequences--became dominant. Odette Lienau contends that the practice is not essential for functioning capital markets, and demonstrates its reliance on absolutist ideas that have come under fire over the last century. Lienau traces debt continuity from World War I to the present, emphasizing the role of government officials, the World Bank, and private markets in shaping our existing framework. Challenging previous accounts, she argues that Soviet Russia's repudiation of Tsarist debt and Great Britain's 1923 arbitration with Costa Rica hint at the feasibility of selective debt cancellation. Rethinking Sovereign Debt calls on scholars and policymakers to recognize political choice and historical precedent in sovereign debt and reputation, in order to move beyond an impasse when a government is overthrown.
Author: Thordur Jonasson
Publisher: International Monetary Fund
ISBN: 1484350545
Category : Business & Economics
Languages : en
Pages : 133
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Book Description
This paper provides an overview of sovereign debt portfolio risks and discusses various liability management operations (LMOs) and instruments used by public debt managers to mitigate these risks. Debt management strategies analyzed in the context of helping reach debt portfolio targets and attain desired portfolio structures. Also, the paper outlines how LMOs could be integrated into a debt management strategy and serve as policy tools to reduce potential debt portfolio vulnerabilities. Further, the paper presents operational issues faced by debt managers, including the need to develop a risk management framework, interactions of debt management with fiscal policy, monetary policy, and financial stability, as well as efficient government bond markets.
Author: Barry R. Weingast
Publisher: Hoover Press
ISBN: 9780817957230
Category : Competition, International
Languages : en
Pages : 60
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Book Description
Author: Anton Brender
Publisher:
ISBN: 9789461383372
Category : Business & Economics
Languages : en
Pages : 0
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Book Description
"The Sovereign Debt Crisis," 2012 edition, looked at how governments ran up substantial deficits in order to avert a worldwide depression and their subsequent attempts to rebalance their budgets. This updated edition concentrates on the delicate balancing act the economies of the United States, Japan, and the eurozone face between the present need to boost sluggish economic growth by providing sufficiently cheap, low-risk credit and the longer-term challenges of cutting massive debt and returning to a sustainable fiscal policy. The authors argue that many of the euro area economies, having noticeable difficulty paying their international debts, are in a sovereign debt crisis, while America and Japan are, for now, holding steady but in real danger of slipping into crisis. The book shows how the process has evolved in these three major developed economies and how their policy choices impact global financial markets.
Author: Ms.Li L. Ong
Publisher: International Monetary Fund
ISBN: 1475527063
Category : Business & Economics
Languages : en
Pages : 64
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Book Description
Credibility is the bedrock of any crisis stress test. The use of stress tests to manage systemic risk was introduced by the U.S. authorities in 2009 in the form of the Supervisory Capital Assessment Program. Since then, supervisory authorities in other jurisdictions have also conducted similar exercises. In some of those cases, the design and implementation of certainelements of the framework have been criticized for their lack of credibility. This paper proposes a set of guidelines for constructing an effective crisis stress test. It combines financial markets impact studies of previous exercises with relevant case study information gleaned from those experiences to identify the key elements and to formulate their appropriate design. Pertinent concepts, issues and nuances particular to crisis stress testing are also discussed. The findings may be useful for country authorities seeking to include stress tests in their crisis management arsenal, as well as for the design of crisis programs.
Author: Mr.Francisco Roch
Publisher: International Monetary Fund
ISBN: 1475533241
Category : Business & Economics
Languages : en
Pages : 46
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Book Description
Motivated by the recent European debt crisis, this paper investigates the scope for a bailout guarantee in a sovereign debt crisis. Defaults may arise from negative income shocks, government impatience or a "sunspot"-coordinated buyers strike. We introduce a bailout agency, and characterize the minimal actuarially fair intervention that guarantees the no-buyers-strike fundamental equilibrium, relying on the market for residual financing. The intervention makes it cheaper for governments to borrow, inducing them borrow more, leaving default probabilities possibly rather unchanged. The maximal backstop will be pulled precisely when fundamentals worsen.
