TY  - RPRT
A1  - Darracq Pariès, Matthieu
A1  - Faia, Ester
A1  - Rodriguez Palenzuela, Diego
T1  - Bank and sovereign debt risk connection : [Version Mai 2014]
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 moral hazard and liquidity risk (sudden deposit withdrawals): banks invest in risky government bonds as a form of capital buffer 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.
KW  - liquidity risk
KW  - sovereign risk
KW  - capital regulation
Y1  - 2014
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/34519
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-345197
UR  - http://www.wiwi.uni-frankfurt.de/profs/faia/welcome_files/DFP_final.pdf
IS  - Version Mai 2014
ER  -