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  • February 2018
  • Article
  • Review of Finance

Financial Repression in the European Sovereign Debt Crisis

By: Bo Becker and Victoria Ivashina
  • Format:Print
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Abstract

By the end of 2013, the share of government debt held by the domestic banking sectors of Eurozone countries was more than twice its 2007 level. We show that this type of increasing reliance on the domestic banking sector for absorbing government bonds generates a crowding out of corporate lending. For a given domestic firm, new debt is less likely to be a loan—i.e., the loan supply contracts—when local banks have purchased more domestic sovereign debt and when that debt is risky (as measured by CDS spreads). These effects are most pronounced in the period following the second Greek bailout in early 2010.

Keywords

Credit Cycles; Sovereign Debt; Financial Repression; Sovereign Finance; Borrowing and Debt; Credit; Europe

Citation

Becker, Bo, and Victoria Ivashina. "Financial Repression in the European Sovereign Debt Crisis." Review of Finance 22, no. 1 (February 2018): 83–115.
  • SSRN
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About The Author

Victoria Ivashina

Finance
→More Publications

More from the Authors

    • AEA Papers and Proceedings

    Weak Corporate Insolvency Rules: The Missing Driver of Zombie Lending

    By: Bo Becker and Victoria Ivashina
    • 2022
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    High-Yield Debt Covenants and Their Real Effects

    By: Falk Bräuning, Victoria Ivashina and Ali Ozdagli
    • March 2022
    • Journal of Monetary Economics

    Loan Types and the Bank Lending Channel

    By: Victoria Ivashina, Luc Laeven and Enrique Moral-Benito
More from the Authors
  • Weak Corporate Insolvency Rules: The Missing Driver of Zombie Lending By: Bo Becker and Victoria Ivashina
  • High-Yield Debt Covenants and Their Real Effects By: Falk Bräuning, Victoria Ivashina and Ali Ozdagli
  • Loan Types and the Bank Lending Channel By: Victoria Ivashina, Luc Laeven and Enrique Moral-Benito
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