The Invisible Hand of the Government: Moral Suasion during the European Sovereign Debt Crisis
- Ongena, Steven University of Zurich, Plattenstrasse 32, CH-8032 Zürich, Switzerland, Swiss Finance Institute, KU Leuven and CEPR (email: )
- Popov, Alexander European Central Bank, Sonnemannstrasse 20, D 60314 Frankfurt am Main, Germany (email: )
- Van Horen, Neeltje Bank of England, Threadneedle Street, EC2R 8AH London, United Kingdom, and CEPR (email: )
Published in:
- American Economic Journal: Macroeconomics. - American Economic Association. - 2019, vol. 11, no. 4, p. 346-379
English
Using proprietary data on banks’ monthly securities holdings, we show that during the European sovereign debt crisis, domestic banks in fiscally stressed countries were considerably more likely than foreign banks to increase their holdings of domestic sovereign bonds during months when the government needed to roll over a relatively large amount of maturing debt. This result cannot be explained by risk shifting, carry trading, or regulatory compliance. Domestic banks that received government support, are small, or with weaker balance sheets were particularly susceptible to “moral suasion,” while governance of banks played less of a role. (JEL D72, E62, G21, G28, H11, H63).
- Language
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- English
- Open access status
- bronze
- Identifiers
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- DOI 10.1257/mac.20160377
- ISSN 1945-7707
- Persistent URL
- https://sonar.ch/global/documents/73950
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