TY  - UNPD
A1  - Darracq Pariès, Matthieu
A1  - Faia, Ester
A1  - Rodriguez Palenzuela, Diego
T1  - Bank and sovereign debt risk connection : [draft december 2012]
T2  - SAFE working paper series ; No. 7
N2  - Euro area data show a positive connection between sovereign and bank risk, which increases with banks’ and sovereign long run fragility. We build a macro model with banks subject to incentive problems and liquidity risk (in the form of liquidity based banks’ runs) which provides a link between endogenous bank capital and macro and policy risk. Our banks also invest in risky government bonds used as capital buffer to self-insure against liquidity risk. The model can replicate the positive connection between sovereign and bank risk observed in the data. Central bank liquidity policy, through full allotment policy, is successful in stabilizing the spiraling feedback loops between bank and sovereign risk.
T3  - SAFE working paper - 7 
KW  - liquidity risk
KW  - sovereign risk
KW  - capital regulation
Y1  - 2013
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/29377
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-293779
UR  - http://ssrn.com/abstract=2228494
IS  - draft december 2012
PB  - Goethe-Univ., House of Finance, Sustainable Architecture for Finance in Europe, SAFE
CY  - Frankfurt am Main
ER  -