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  1. Private overborrowing under sovereign risk
    Author: Arce, Fernando
    Published: [2022]
    Publisher:  Federal Reserve Bank of Chicago, [Chicago, Illinois]

    This paper proposes a quantitative theory of the interaction between private and public debt in an open economy. Excessive private debt increases the frequency of financial crises. During such crises the government provides fiscal bailouts financed... more

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    Verlag (kostenfrei)
    Resolving-System (kostenfrei)
    Resolving-System (kostenfrei)

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 244
    Inter-library loan:
    No inter-library loan

     

    This paper proposes a quantitative theory of the interaction between private and public debt in an open economy. Excessive private debt increases the frequency of financial crises. During such crises the government provides fiscal bailouts financed with risky public debt. This response may cause a sovereign debt crisis, which is characterized by a higher probability of a sovereign default. The model is quantitatively consistent with the evolution of private debt, public debt, and sovereign spreads in Spain from 1999 to 2015, and provides an estimate of the degree of overborrowing, its effect on the spreads, and the optimal macroprudential policy.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/264332
    Series: [Working paper] / Federal Reserve Bank of Chicago ; WP 2022, 17 (December 9, 2021)
    Subjects: Bailouts; credit frictions; €nancial crises; macroprudential policy; sovereign default
    Scope: 1 Online-Ressource (circa 71 Seiten), Illustrationen
  2. A macroprudential theory of foreign reserve accumulation
    Author: Arce, Fernando; Bengui, Julien; Bianchi, Javier
    Published: [2022]
    Publisher:  Federal Reserve Bank of Chicago, [Chicago, Illinois]

    We propose a macroprudential theory of foreign reserve accumulation that can rationalize the secular trends in public and private international capital flows. In middle-income countries, the increase in international reserves has been associated with... more

    Access:
    Verlag (kostenfrei)
    Resolving-System (kostenfrei)
    Resolving-System (kostenfrei)

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 244
    Inter-library loan:
    No inter-library loan

     

    We propose a macroprudential theory of foreign reserve accumulation that can rationalize the secular trends in public and private international capital flows. In middle-income countries, the increase in international reserves has been associated with elevated private capital inflows, both in the aggregate and in the cross-section, and reserve holdings have been more prominent in economies with a more open capital account. We present an open economy model of financial crises that is consistent with these features. We show that the optimal reserve accumulation policy leans against the wind, raising gross private borrowing while improving the economy’s net foreign asset position and reducing the exposure to financial crises.

     
    Export to reference management software   RIS file
      BibTeX file
    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/264330
    Series: [Working paper] / Federal Reserve Bank of Chicago ; WP 2022, 16 (January 2022)
    Subjects: Macroprudential policy; international reserves; €nancial crises; gross capital ƒows
    Scope: 1 Online-Ressource (circa 60 Seiten), Illustrationen