This paper provides a comprehensive overview of China’s lending to developing countries - a central feature of today’s international financial system. Building on our previous research and the work of others, we document the scale, destination, and terms of China’s overseas lending boom,...

This paper deals with the effectiveness of crisis management measures used by national authorities to tackle a systemic banking crisis. Quarterly panel dataset of 69 countries over the time span 1970 to 2023 was created and a total of 54 crisis periods were examined based on the identification...

Several countries now require banks or money market funds to impose state-contingent costs on shortterm creditors to absorb financial stress. We study these requirements as part of the broader prudential toolkit in a model with five key ingredients: banks may face an aggregate stress state with...

This paper studies the effects of introducing a Central Bank Digital Currency (CBDC) on economic output, bank intermediation and financial stability in a closed economy using an Agentbased Stock Flow Consistent (AB-SFC) Model. Thereby a digital bank run is simulated across various economic...

This article is focusing on the economic literature attempting to solve the problem of the impossible trilemmas of the euro area, by reconciling the relations between the three essential pillars - supranational monetary independence, national fiscal independence and the no bail-out clause...

This paper quanti.es the future implications of repayment of bailout loans received by Greece from the EU in the previous decade. These debt obligations amount today to 240 billion euros or 70% of the country’s total public debt and have to be repaid by 2070. This is investigated in a dynamic...

In the aftermath of the European sovereign debt crisis, the question of who should bear the burden of banking crises has been a cornerstone of the new supervisory framework in Europe. We evaluate the bail-in regulation (BRRD) for bank bond holdings using a proprietary database covering holdings...

This paper examines the consequences of Chinese regulators deviating from a long-standing full bailout policy in addressing the distress of a city-level commercial bank. This policy shift led to a persistent widening of credit spreads and a significant decline in funding ratios for negotiable...

This paper develops a debt-run model to study the effects of liquidity injections on debt markets in the presence of a renegotiation option. In the model, creditors decide when to withdraw their funding and equityholders can renegotiate the contract terms of debt. We show that when equityholders...

This paper studies the link between government guarantees for banks and bank asset concentration. We show theoretically that these guarantees, when combined with high leverage, incentivize banks to further invest in asset classes they are already heavily exposed to: the risk-taking via asset...

The UBS- Credit Suisse (CS) merger in March 2023, one of the biggest banking unions in history, was an emergency rescue deal engineered by Swiss authorities to avoid more market-shaking turmoil in global banking. The merger resulted in a significant increase in the combined stakeholder net...

We analyze the design of bailout regimes when investment is distorted by a too-many-to-fail problem. The first-best allocation equalizes benefits from more banks investing in high-return projects with endogenously higher systemic risk due to more banks failing simultaneously. A standard bailout...

We analyze the effects of bailout policies on borrower surplus in a two-period Hotelling model of competition with switching costs and poaching. Before the second period of competition, banks may sometimes fail or face capacity constraints because of random shocks and uncertain bailouts. If...

We show the anticipation of a bailout of distressed firms worsens ex ante adverse selection, causing a market freeze and inviting government intervention - a "bailout trap." When firms of heterogenous qualities raise financing, high-quality firms are willing to bear adverse selection costs...

An outside stakeholder’s commitment to bail out a levered investment fund mightencourage the fund manager to take extreme risks. But what if the bailout were harsh?The loan would have a penalty rate and the manager would have to sacrifice partequity interest in the fund. I show that as the...

Despite a formal 'no-bailout clause,' we estimate significant net present value transfers from the European Union to Cyprus, Greece, Ireland, Portugal, and Spain, ranging from roughly 0.5% (Ireland) to a whopping 43% (Greece) of 2010 output during the Eurozone crisis. We propose a model to...

We analyze the design of bailout regimes when investment is distorted by a toomany-to-fail problem. The first-best allocation equalizes benefits from more banks investing in high-return projects with endogenously higher systemic risk due to more banks failing simultaneously. A standard bailout...

The interface of political economy with arts and literature has become dominated by a particular image: capital's Grinch-like theft of the future. But this image overlooks the peculiar temporal structure of neoliberalism, which renews its broken promises by making up ever more excuses for the...

This paper evaluates the effects of government bailout policies on bank performance in the EU banking sector. Using a unique dataset of government supports, I identify banks which received state support in years 2008-2014 and corresponding control group of banks. I apply...

Past papers show that public bailouts increase the moral hazard of rescued banks. What happens to other banks in the banking sector? Using a hand-collected dataset of European banks from 2007 to 2017 and adopting a dynamic difference-in-differences approach, we document that public bailouts...