Sovereign-Bank Diabolic Loop: The Government Procurement Channel

Liquidity, Government Bonds and Sovereign Debt Crises

This paper analyses the European financial crisis through the lens of the sovereign bond liquidity. Using novel data we show that government securities are the prime collateral in the European repo market, which is becoming a primary source of funding for the banking system in the Euro area. We document that the repo haircuts on peripheral government bonds sharply increased during the crisis, r...

Evaluating Discretion in Government Procurement

Government procurement contracts generally garner a small number of bids, and it is not uncommon for only one bid to be considered. This paper quantifies multiple factors determining the extent of competition observed in the United States federal procurement data for commercially unavailable IT and telecommunications service contracts. We develop, identify, and estimate a principal-agent model ...

The Fear of Discretion in Government Procurement

Sovereign debt , government myopia , and the financial sector 1 Viral

What determines the sustainability of sovereign debt? In this paper, we develop a model where myopic governments seek electoral popularity but can nevertheless commit credibly to service external debt. They do not default when they are poor even though default costs are low because they would lose access to debt markets and be forced to reduce spending; they do not default when they become rich...

Sovereign Risk Premiums in the European Government Bond Market

This paper provides a study of bond yield differentials among EU government bonds issued between 1993 and 2005 on the basis of a unique dataset of issue spreads in the US and DM (Euro) bond market. Interest differentials between bonds issued by EU countries and Germany or the USA contain risk premiums which increase with fiscal imbalances and depend negatively on the issuer's relative bond mark...