This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank … regulators in risky countries have an incentive to allow their banks to hold home risky bonds and risk defaults, while regulators … cheaply, effectively shifting the risk of some of the potential sovereign default losses on the common central bank …

This paper studies the recessionary effects of sovereign default risk using firm-level data and a model of sovereign … the government and raises the risk that it will default on its debt. The associated increase in sovereign interest rate … the effects that sovereign risk has on real economic activity. In an application to Italy, we find that the progressive …

-insurance, liquidity and risk-sharing. The government's aim to redistribute resources across agents and through time in response to …, the default decision, and risk premia. Calibrated to Spanish data, the model is consistent with key cyclical co …, are preceded by surging debt and spreads, and occur with relatively low external debt. Default risk limits the sustainable …

national economy. It is based on the modern theory and practice of contingent claims analysis (CCA), which is successfully used … today at the level of individual banks by managers, investors, and regulators. The basic analytical tool is the risk … the effects of asset-liability mismatches within and across institutions. Risk-adjusted CCA balance sheets facilitate …