Linking Bank Crises and Sovereign Defaults: Evidence from Emerging Markets

Balteanu, Irina; Erce, Aitor

doi:10.1057/s41308-018-0066-4

Cited by 29 publications

(33 citation statements)

References 70 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…37 banking crisis started after the default. A comparable result is found in Balteanu and Erce (2018) for a similar period. The differences in findings may partly be explained by differences in methods, samples, and crisis dating.…”

Section: Evidence From Realized Defaultssupporting

confidence: 87%

Sovereign Debt in the 21st Century: Looking Backward, Looking Forward

Mitchener¹,

Trebesch²

2021

SSRN Journal

View full text Add to dashboard Cite

This survey paper was prepared for the Journal of Economic Literature. We thank the Editor, Steven Durlauf, as well as four anonymous referees for very helpful comments and suggestions. We thank Matthew Cunningham, Jonathan Öztunc, Torge Marxen, Brenton Stefko and Thore Petersen for very helpful research assistance and Josefin Meyer and Lucie Stoppok for sharing data and making suggestions. We further thank Andreea Maerean, Rui Esteves, Galine Hale, Steve Haber, Kim Oosterlinck, and Noel Maurer for helpful discussion and comments. Trebesch gratefully acknowledges financial support from the German Research Foundation (DFG, SPP 1859). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

show abstract

Section: Evidence From Realized Defaultssupporting

confidence: 87%

Sovereign Debt in the 21st Century: Looking Backward, Looking Forward

Mitchener¹,

Trebesch²

2021

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Focusing on emerging markets, Reinhart and Rogoff () show that (a) banking crises, both home‐grown and imported, often accompany sovereign debt crises, (b) public borrowing rises sharply ahead of debt crises, and (c) the sovereign has “hidden debt,” both domestic public debt and contingent private debt. Closely related, Balteanu and Erce () show that twin sovereign debt and bank crises always combine with boom–bust patterns in credit, and Baldacci and Gupta () and Baldacci, Mulas‐Granados, and Gupta () reveal that bank crises produce sovereign debt distress because of a combination of lower revenues and higher expenditures.…”

Section: Literature Review: Pass‐through Channels?mentioning

confidence: 96%

Bank and sovereign risk pass‐through: Evidence from the euro area

Erce¹

2019

International Finance

Self Cite

View full text Add to dashboard Cite

Sovereign and bank risk can feed into each other and trigger destabilizing dynamics. In this paper, I use euro‐area countries’ credit default swap data to study what factors and shocks underlie bouts of enhanced correlation between bank and sovereign risk. Sovereign risk pass‐through, where sovereign instability undermines domestic banks’ health, is stronger than bank risk pass‐through, where bank instability taints the sovereign's fiscal outlook. When banks are more exposed to the sovereign or the latter loses its investment‐grade status, sovereign risk transfers to banks particularly strongly. In the other direction, risk transmits to the sovereign from banks more strongly if the banks are larger or if the government is bailing them out. During bailout periods, bank risk pass‐through is more likely if banks hold more domestic sovereign debt, they are more externally indebted, or the sovereign debt stock is higher.

show abstract

“…This magnifies the output contraction associated with credit events, and acts as a further disincentive to default. Of course, not all default episodes feature a banking sector with overexposure to government securities -but those that do tend to be much more strongly associated with subsequent banking crises, as described in Balteanu & Erce (2017) and much of the European "doom loop" literature.…”

Section: Related Literaturementioning

confidence: 99%

Balance Sheets and Debt Crises – Empirical Regularities for Modern Cases of Sovereign Distress

Meyer‐Cirkel¹,

Huertas²

2021

IMF Working Papers

View full text Add to dashboard Cite

Sovereign debt crises are more than just a story about debt levels and primary balances. Sectoral balance sheets, and in particular the net worth of households and banks, play an important role in determining whether an episode of increased rollover risk will deteriorate into full-blown default. This paper characterizes the stylized facts surrounding debt crises from 1990 to 2019: the behavior of government finances, aggregate macroeconomic variables, and the accompanying changes in the net worth of the private sector. We then use a logistic model to estimate the probability of undergoing default for a panel of 75 countries, and find that the net worth of the household and banking sectors is a significant predictor in addition to the usual flow variables included in standard debt sustainability analyses.

show abstract

Linking Bank Crises and Sovereign Defaults: Evidence from Emerging Markets

Cited by 29 publications

References 70 publications

Sovereign Debt in the 21st Century: Looking Backward, Looking Forward

Sovereign Debt in the 21st Century: Looking Backward, Looking Forward

Bank and sovereign risk pass‐through: Evidence from the euro area

Balance Sheets and Debt Crises – Empirical Regularities for Modern Cases of Sovereign Distress

Contact Info

Product

Resources

About