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Fiscal Consolidations and Banking Stability
Jacopo Cimadomo - Sebastian Hauptmeier -Tom Zimmermann
eBook Edition: 2012
 
We empirically investigate the effects of fiscal policy on bank balance sheets, focusing on episodes of fiscal consolidation. To this aim, we employ a very rich data set of individual banks’ balance sheets, combined with a newly compiled data set on fiscal consolidations. We find that standard capital adequacy ratios such as the Tier-1 ratio tend to improve following episodes of fiscal consolidation. Our results suggest that this improvement results from a portfolio re-balancing from private to public debt securities which reduces the risk-weighted value of assets. In fact, if fiscal adjustment efforts are perceived as structural policy changes that improve the sustainability of public finances and, therefore, reduces credit risk, the banks’ demand for government securities increases relative to other assets.(From Author)

eBook Contents


Non-technical summary - Abstract - Résumé non technique - Résumé court - Introduction - The link between fiscal policy and bank balance sheets - Empirical analysis - Robustness - Conclusion - Reference - List of working papers released by CEPII

eBook License
: Copyrighted (Personal Use Only by downloading from CEPII)

Free PDF eBook - 459 Kb - 39 Pages