Bank regulation and sovereign risk : a paradox

Detalhes bibliográficos
Autor(a) principal: Afonso, António
Data de Publicação: 2023
Outros Autores: Teixeira, André
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10400.5/27758
Resumo: This paper investigates the impact of banking prudential regulation on sovereign risk. We show that prudential regulation reduces sovereign risk and induces governments to spend more. As a result, countries with tight prudential regulation have lower primary budget balances and accumulate more government debt over time. This means that prudential regulation reduces private debt, while paradoxically increasing government debt. We explore several explanations for this paradox. Our results suggest that prudential regulation enables governments to accumulate debt because they improve the nation’s credit rating and its borrowing conditions in sovereign bond markets.
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spelling Bank regulation and sovereign risk : a paradoxbank regulationfiscal policymacroprudential policysovereign debtsovereign riskThis paper investigates the impact of banking prudential regulation on sovereign risk. We show that prudential regulation reduces sovereign risk and induces governments to spend more. As a result, countries with tight prudential regulation have lower primary budget balances and accumulate more government debt over time. This means that prudential regulation reduces private debt, while paradoxically increasing government debt. We explore several explanations for this paradox. Our results suggest that prudential regulation enables governments to accumulate debt because they improve the nation’s credit rating and its borrowing conditions in sovereign bond markets.ISEG - REM - Research in Economics and MathematicsRepositório da Universidade de LisboaAfonso, AntónioTeixeira, André2023-05-12T10:22:12Z2023-052023-05-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/27758engAfonso, António e André Teixeira (2023). "Bank regulation and sovereign risk : a paradox". REM Working paper series, nº 0272/20232184-108Xinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-05-14T01:30:52Zoai:www.repository.utl.pt:10400.5/27758Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T17:52:02.279748Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Bank regulation and sovereign risk : a paradox
title Bank regulation and sovereign risk : a paradox
spellingShingle Bank regulation and sovereign risk : a paradox
Afonso, António
bank regulation
fiscal policy
macroprudential policy
sovereign debt
sovereign risk
title_short Bank regulation and sovereign risk : a paradox
title_full Bank regulation and sovereign risk : a paradox
title_fullStr Bank regulation and sovereign risk : a paradox
title_full_unstemmed Bank regulation and sovereign risk : a paradox
title_sort Bank regulation and sovereign risk : a paradox
author Afonso, António
author_facet Afonso, António
Teixeira, André
author_role author
author2 Teixeira, André
author2_role author
dc.contributor.none.fl_str_mv Repositório da Universidade de Lisboa
dc.contributor.author.fl_str_mv Afonso, António
Teixeira, André
dc.subject.por.fl_str_mv bank regulation
fiscal policy
macroprudential policy
sovereign debt
sovereign risk
topic bank regulation
fiscal policy
macroprudential policy
sovereign debt
sovereign risk
description This paper investigates the impact of banking prudential regulation on sovereign risk. We show that prudential regulation reduces sovereign risk and induces governments to spend more. As a result, countries with tight prudential regulation have lower primary budget balances and accumulate more government debt over time. This means that prudential regulation reduces private debt, while paradoxically increasing government debt. We explore several explanations for this paradox. Our results suggest that prudential regulation enables governments to accumulate debt because they improve the nation’s credit rating and its borrowing conditions in sovereign bond markets.
publishDate 2023
dc.date.none.fl_str_mv 2023-05-12T10:22:12Z
2023-05
2023-05-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10400.5/27758
url http://hdl.handle.net/10400.5/27758
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv Afonso, António e André Teixeira (2023). "Bank regulation and sovereign risk : a paradox". REM Working paper series, nº 0272/2023
2184-108X
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv ISEG - REM - Research in Economics and Mathematics
publisher.none.fl_str_mv ISEG - REM - Research in Economics and Mathematics
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron_str RCAAP
institution RCAAP
reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
repository.mail.fl_str_mv
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