Government guarantees and financial stability

Government Guarantees Behind Banks : International

To gauge governments’ contingent liabilities behind banking systems, we employ: Sovereign ratings (SOVBD); bank’s financial strength ratings (assessing solidity without external support; BFSR); bank’s overall credit ratings (government support reduces default probabilities; BDCR). We find: 1) BDCR and SOVBD are positively correlated, much more in developing countries, where sovereign guarantees...

Valuing Government Guarantees Fannie and Freddie Revisited

Government guarantees and self-fulfilling speculative attacks

This paper explores the role played by government guarantees to banks’ foreign creditors as a root cause of self-fulfilling twin banking-currency crises. We develop a general equilibrium model in which such guarantees lead to these types of crises. Absent government guarantees, such crises are not possible. The model has three key properties. First, in the presence of government guarantees bank...

Government Guarantees and Self-FulÞlling Speculative Attacks

Valuing Conjectural Government Guarantees of Fnma Liabilities