Hostname: page-component-586b7cd67f-r5fsc Total loading time: 0 Render date: 2024-11-27T18:19:34.619Z Has data issue: false hasContentIssue false
  • English
  • Français

Fiscal Deficits, Bank Credit Risk, and Loan-Loss Provisions

Published online by Cambridge University Press:  30 June 2020

Felipe Bastos Gurgel Silva Open the ORCID record for Felipe Bastos Gurgel Silva [Opens in a new window]
Felipe Bastos Gurgel Silva*
Affiliation:
University of Missouri Trulaske College of [email protected]
*
[email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Fiscal deficits represent an important variable for banks’ aggregate credit risk, revealing governments’ ability to curb banks’ losses in bad states, either with direct cash infusions or with macroeconomic stabilization policies. Deteriorating deficits are associated with increasing financial distress of the banking sector and higher levels of loan-loss provisions. The effect is more pronounced for banks with a strong aversion to underprovisioning and is robust to a battery of tests and to the identification of fiscal shocks using military-spending data. This association represents an additional source of negative comovement between provisions and economic conditions, with implications for financial stability.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 5 , August 2021 , pp. 1537 - 1589
Copyright
© The Author(s), 2020. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This article is based on my PhD dissertation at Cornell University (all rights reserved). I am extremely grateful to my dissertation committee members: Robert Jarrow (co-chair), Sanjeev Bhojraj (co-chair), Warren Bailey, George Gao, and Kenneth Merkley for their encouragement and support throughout this project, as well as Donald van Deventer, Mark Mesler, and Martin Zorn from Kamakura Corporation for sharing the credit-risk data. Charles Oberweiser provided excellent research assistantship. This article also benefited from insightful comments and suggestions received from Aleksander Aleszczyk (discussant), Matt Baron, Rob Bloomfield, Murillo Campello, Gustavo Cortes, Igor Cunha, Manuela Dantas, Mike Durney, Jere Francis, Ryan Guggenmos, Umit Gurun, Jarrad Harford (the editor), Gaurav Kankanhalli, G. Andrew Karolyi, Inder Khurana, Dawoon Kim, Vladimir Kotomin (discussant), Bob Libby, Marcelo Moreira, Michael O’Doherty, Raynolde Pereira, Kristi Rennekamp, Raluca Roman (the referee), Mani Sethuraman, André Silva (discussant), Blake Steenhoven, and Stephen Zeff and workshop participants at Cornell University, Rice University, the University of Missouri, the University of Texas at Dallas, the 2019 Lubrafin Annual Meeting, the 2019 Financial Management Association (FMA) Annual Meeting, and the 2020 Midwest Finance Association Annual Meeting. I thank G. Andrew Karolyi, John Sedunov, and Alvaro Taboada for generously sharing their data on international bank flows, Sebastian Goerlich from the Bank for International Settlements (BIS) for clarifying important aspects of the CBS data, as well as George Gao, Xiaomeng Lu, and Zhaogang Song for courteously providing their data on rare disaster concerns. I also thank Jeandson Lopes, Paulo Machado, and three credit-risk-modeling analysts who wish to remain anonymous. An earlier version of this article has been circulated under the title “The Effects of Fiscal Policy on Banks’ Financial Reporting.” All errors are my own.

References

Acharya, V.; Drechsler, I.; and Schnabl, P.. “A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk.” Journal of Finance, 69 (2014), 2689–2739.CrossRefGoogle Scholar
Acharya, V.; Engle, R.; and Richardson, M.. “Capital Shortfall: A New Approach to Ranking and Regulating Systemic Risks.” American Economic Review, 102 (2012), 59–64.CrossRefGoogle Scholar
Acharya, V. V.; Aginer, D.; and Warburton, A. J.. “The End of Market Discipline? Investor Expectations of Implicit Government Guarantees.” Available at https://dx.doi.org/10.2139/ssrn.1961656 (2016).Google Scholar
Acharya, V. V.; Pedersen, L.; Philippon, T.; and Richardson, M., “Taxing Systemic Risk.” Managing and Measuring Risk: Emerging Global Standards and Regulations After the Financial Crisis, Altman, E., Roggi, O., eds. Singapore: World Scientific (2013), 99–122.CrossRefGoogle Scholar
Acharya, V. V., and Ryan, S. G.. “Banks’ Financial Reporting and Financial System Stability.” Journal of Accounting Research, 54 (2016), 277–340.CrossRefGoogle Scholar
Agénor, P.-R., and Zilberman, R.. “Loan Loss Provisioning Rules, Procyclicality, and Financial Volatility.” Journal of Banking and Finance, 61 (2015), 301–315.CrossRefGoogle Scholar
Akinci, O., and Olmstead-Rumsey, J.. “How Effective Are Macroprudential Policies? An Empirical Investigation.” Journal of Financial Intermediation, 33 (2018), 33–57.CrossRefGoogle Scholar
Alesina, A., and Passalacqua, A.. “The Political Economy of Government Debt.” In Handbook of Macroeconomics, Vol 2., Taylor, J. B. and Uhlig, H., eds. Netherlands, North Holland: Elsevier (2016), 2599–2651.Google Scholar
Allen, F.; Beck, T.; Carletti, E.; Lane, P.; Schoenmaker, D.; and Wolf, W.. Cross-Border Banking in Europe: Implications for Financial Stability and Macroeconomic Policies, London, UK: Centre for Economic Policy Research (2011).Google Scholar
Allen, F.; Carletti, E.; Goldstein, I.; and Leonello, A.. “Government Guarantees and Financial Stability.” Journal of Economic Theory, 177 (2018), 518–557.CrossRefGoogle Scholar
Anderson, T. W., and Rubin, H.. “Estimation of the Parameters of a Single Equation in a Complete System of Stochastic Equations.” Annals of Mathematical Statistics, 20 (1949), 46–63.CrossRefGoogle Scholar
Auerbach, A. J., and Gorodnichenko, Y.. “Measuring the Output Responses to Fiscal Policy.” American Economic Journal: Economic Policy, 4 (2012), 1–27.Google Scholar
Baker, S. R.; Bloom, N.; and Davis, S. J.. “Measuring Economic Policy Uncertainty.” Quarterly Journal of Economics, 131 (2016), 1593–1636.CrossRefGoogle Scholar
Baron, M. “Countercyclical Bank Equity Issuance.” Review of Financial Studies, 33 (2020), 4186–4230.CrossRefGoogle Scholar
Baron, M.; Verner, E.; and Xiong, W.. “Banking Crises Without Panics.” Quarterly Journal of Economics, forthcoming (2020).CrossRefGoogle Scholar
Baron, M., and Xiong, W.. “Credit Expansion and Neglected Crash Risk.” Quarterly Journal of Economics, 132 (2017), 713–764.CrossRefGoogle Scholar
Baxter, M., and King, R. G.. “Fiscal Policy in General Equilibrium.” American Economic Review, 83 (1993), 315–334.Google Scholar
Beaver, W.; Eger, C.; Ryan, S.; and Wolfson, M.. “Financial Reporting, Supplemental Disclosures, and Bank Share Prices.” Journal of Accounting Research, 27 (1989), 157–178.CrossRefGoogle Scholar
Beaver, W. H., and Engel, E. E.. “Discretionary Behavior with Respect to Allowances for Loan Losses and the Behavior of Security Prices.” Journal of Accounting and Economics, 22 (1996), 177–206.CrossRefGoogle Scholar
Berger, A. N., and Bouwman, C. H.. “Bank Liquidity Creation, Monetary Policy, and Financial Crises.” Journal of Financial Stability, 30 (2017), 139–155.CrossRefGoogle Scholar
Berger, A. N.; Ghoul, S. El; Guedhami, O.; and Roman, R. A.. “Internationalization and Bank Risk.” Management Science, 63 (2016), 2283–2301.CrossRefGoogle Scholar
Berndt, A.; Lustig, H.; and. Yeltekin, S.. “How Does the US Government Finance Fiscal Shocks?” American Economic Journal: Macroeconomics, 4 (2012), 69–104.Google Scholar
Bharath, S. T., and Shumway, T.. “Forecasting Default with the Merton Distance to Default Model.” Review of Financial Studies, 21 (2008), 1339–1369.CrossRefGoogle Scholar
Bikker, J. A., and Metzemakers, P. A.. “Bank Provisioning Behaviour and Procyclicality.” Journal of International Financial Markets, Institutions and Money, 15 (2005), 141–157.CrossRefGoogle Scholar
Black, F., and Scholes, M.. “The Pricing of Options and Corporate Liabilities.” Journal of Political Economy, 81 (1973), 637–654.CrossRefGoogle Scholar
Blanchard, O., and Perotti, R.. “An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output.” Quarterly Journal of Economics, 117 (2002), 1329–1368.CrossRefGoogle Scholar
Borio, C.; Furfine, C.; and Lowe, P.. “Procyclicality of the Financial System and Financial Stability: Issues and Policy Options.” BIS Papers, 1 (2001), 1–57, https://www.bis.org/publ/bppdf/bispap01a.pdf.Google Scholar
Bouvatier, V., and Lepetit, L.. “Provisioning Rules and Bank Lending: A Theoretical Model.” Journal of Financial Stability, 8 (2012), 25–31.CrossRefGoogle Scholar
Brandao-Marques, L.; Correa, R.; and Sapriza, H.. “Government Support, Regulation, and Risk Taking in the Banking Sector.” Journal of Banking and Finance, 112 (2018), 10,524.Google Scholar
Breitenlechner, M. “An Update of Romer and Romer (2004) Narrative U.S. Monetary Policy Shocks up to 2012Q4.” Tech. rep., mimeo (2018).Google Scholar
Britten-Jones, M., and Neuberger, A.. “Option Prices, Implied Price Processes, and Stochastic Volatility.” Journal of Finance, 55 (2000), 839–866.CrossRefGoogle Scholar
Brownlees, C., and Engle, R. F.. “SRISK: A Conditional Capital Shortfall Measure of Systemic Risk.” Review of Financial Studies, 30 (2016), 48–79.CrossRefGoogle Scholar
Brunnermeier, M. K.; Garicano, L.; Lane, P. R.; Pagano, M.; Reis, R.; Santos, T.; Thesmar, D.; Van Nieuwerburgh, S.; and Vayanos, D.. “The Sovereign-Bank Diabolic Loop and ESBies.” American Economic Review, Papers and Proceedings, 106 (2016), 508–512.CrossRefGoogle Scholar
Bushman, R. M., and Williams, C. D.. “Accounting Discretion, Loan Loss Provisioning, and Discipline of Banks’ Risk-Taking.” Journal of Accounting and Economics, 54 (2012), 1–18.CrossRefGoogle Scholar
Bushman, R. M., and Williams, C. D.. “Delayed Expected Loss Recognition and the Risk Profile of Banks.” Journal of Accounting Research, 53 (2015), 511–553.CrossRefGoogle Scholar
Calomiris, C. W., and Haber, S. H.. Fragile by Design: The Political Origins of Banking Crises and Scarce Credit. Princeton: Princeton University Press (2014).Google Scholar
Campbell, J. Y.; Hilscher, J.; and Szilagyi, J.. “In Search of Distress Risk.” Journal of Finance, 63 (2008), 2899–2939.CrossRefGoogle Scholar
Campbell, J. Y.; Hilscher, J.; and Szilagyi, J.. “Predicting Financial Distress and the Performance of Distressed Stocks.” Journal of Investment Management, 9 (2011), 1–21.Google Scholar
Carr, P., and Madan, D.. “Towards a Theory of Volatility Trading.” In Option Pricing, Interest Rates and Risk Management. Handbooks in Mathematical Finance, Jouini, E., Cvitanic, J., and Musiela, M., eds. Cambridge, UK: Cambridge University Press (2001), 458–476.CrossRefGoogle Scholar
Carr, P., and Wu, L.. “Variance Risk Premiums.” Review of Financial Studies, 22 (2008), 1311–1341.CrossRefGoogle Scholar
Chava, S., and Jarrow, R. A.. “Bankruptcy Prediction with Industry Effects.” Review of Finance, 8 (2004), 537–569.CrossRefGoogle Scholar
Choi, S. M.; Kodres, L. E.; and Lu, J.. Friend or Foe? Cross-Border Linkages, Contagious Banking Crises, and “Coordinated” Macroprudential Policies, Washington, DC: International Monetary Fund (2018).CrossRefGoogle Scholar
Coenen, G.; Erceg, C. J.; Freedman, C.; Furceri, D.; Kumhof, M.; Lalonde, R.; Laxton, D.; Lindé, J.; Mourougane, A.; Muir, D.; Mursula, S.; Resende, C.; Roberts, J.; Roeger, W.; Snudden, S.; Trabandt, M.; and Veld, J.. “Effects of Fiscal Stimulus in Structural Models.” American Economic Journal: Macroeconomics, 4 (2012), 22–68.Google Scholar
Cohen, B. H., and Edwards, G.. “The New Era of Expected Credit Loss Provisioning.” BIS Quarterly Review, (2017).Google Scholar
Correa, R.; Lee, K.-H.; Sapriza, H.; and Suarez, G. A.. “Sovereign Credit Risk, Banks’ Government Support, and Bank Stock Returns around the World.” Journal of Money, Credit and Banking, 46 (2014), 93–121.CrossRefGoogle Scholar
Dantas, M.; Merkley, K. J.; and Silva, F. B. G.. “Government Guarantees and Banks’ Income Smoothing.” Available at https://dx.doi.org/10.2139/ssrn.2797697 (2019).CrossRefGoogle Scholar
De Haas, R., and Van Horen, N.. “International Shock Transmission after the Lehman Brothers Collapse: Evidence from Syndicated Lending.” American Economic Review, 102 (2012), 231–37.CrossRefGoogle Scholar
Demirci, I.; Huang, J.; and Sialm, C.. “Government Debt and Corporate Leverage: International Evidence.” Journal of Financial Economics, 133 (2019), 337–356.CrossRefGoogle Scholar
Demirgüç-Kunt, A., and Detragiache, E.. “The Determinants of Banking Crises in Developing and Developed Countries.” Staff Papers, 45 (1998), 81–109.CrossRefGoogle Scholar
Dewatripont, M., and Tirole, J.. “Macroeconomic Shocks and Banking Regulation.” Journal of Money, Credit and Banking, 44 (2012), 237–254.CrossRefGoogle Scholar
Diamond, D. W., and Dybvig, P. H.. “Bank Runs, Deposit Insurance, and Liquidity.” Journal of Political Economy, 91 (1983), 401–419.CrossRefGoogle Scholar
Diamond, D. W., and Rajan, R. G.. “Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking.” Journal of Political Economy, 109 (2001), 287–327.CrossRefGoogle Scholar
Duffie, D., and Lando, D.. “Term Structures of Credit Spreads with Incomplete Accounting Information.” Econometrica, 69 (2001), 633–664.CrossRefGoogle Scholar
Erlanger, S. “France Will Take Full NATO Membership Again, with Greater Military Role.” New York Times, 11 (2009).Google Scholar
Faria-e-Castro, M.; Martinez, J.; and Philippon, T.. “Runs Versus Lemons: Information Disclosure and Fiscal Capacity.” Review of Economic Studies, 84 (2016), 1683–1707.Google Scholar
Fatás, A., and Mihov, I.. “The Effects of Fiscal Policy on Consumption and Employment: Theory and Evidence.” (2001), CEPR Discussion Paper.Google Scholar
Fatás, A., and Mihov, I.. “The Case for Restricting Fiscal Policy Discretion.” Quarterly Journal of Economics, 118 (2003), 1419–1447.CrossRefGoogle Scholar
Fillat, J. L., and Montoriol-Garriga, J.. Addressing the Pro-Cyclicality of Capital Requirements with a Dynamic Loan Loss Provision System. Boston, MA: Federal Reserve Bank of Boston (2010).Google Scholar
Fischer, M.; Hainz, C.; Rocholl, J.; and Steffen, S.. “Government Guarantees and Bank Risk Taking Incentives.” eSMT Working Paper No. 14–02 (2018).Google Scholar
Flannery, M. J.; Kwan, S. H.; and Nimalendran, M.. “Market Evidence on the Opaqueness of Banking Firms’ Assets.” Journal of Financial Economics, 71 (2004), 419–460.CrossRefGoogle Scholar
Fonseca, A. R., and González, F.. “Cross-Country Determinants of Bank Income Smoothing by Managing Loan-Loss Provisions.” Journal of Banking and Finance, 32 (2008), 217–228.CrossRefGoogle Scholar
Galí, J.; López-Salido, J. D.; and Vallés, J.. “Understanding the Effects of Government Spending on Consumption.” Journal of the European Economic Association, 5 (2007), 227–270.CrossRefGoogle Scholar
Gandhi, P., and Lustig, H.. “Size Anomalies in U.S. Bank Stock Returns.” Journal of Finance, 70 (2015), 733–768.CrossRefGoogle Scholar
Gandhi, P.; Lustig, H. N.; and Plazzi, A.. “Equity Is Cheap for Large Financial Institutions.” Review of Financial Studies, 33 (2020), 4231–4271.Google Scholar
Gao, G. P.; Gao, P.; and Song, Z.. “Do Hedge Funds Exploit Rare Disaster Concerns?” Review of Financial Studies, 31 (2018), 2650–2692.CrossRefGoogle Scholar
Gao, G. P.; Lu, X.; and Song, Z.. “Tail Risk Concerns Everywhere.” Management Science, 65 (2018), 3111–3130.CrossRefGoogle Scholar
Gebhardt, G., and Novotny-Farkas, Z.. “Mandatory IFRS Adoption and Accounting Quality of European Banks.” Journal of Business Finance and Accounting, 38 (2011), 289–333.CrossRefGoogle Scholar
Gilchrist, S., and Zakrajšek, E.. “Credit Spreads and Business Cycle Fluctuations.” American Economic Review, 102 (2012), 1692–1720.CrossRefGoogle Scholar
Greenawalt, M. B., and Sinkey, J. F.. “Bank Loan-Loss Provisions and the Income-Smoothing Hypothesis: An Empirical Analysis, 1976–1984.” Journal of Financial Services Research, 1 (1988), 301–318.CrossRefGoogle Scholar
Gropp, R.; Gruendl, C.; and Guettler, A.. “The Impact of Public Guarantees on Bank Risk-Taking: Evidence from a Natural Experiment.” Review of Finance, 18 (2013), 457–488.CrossRefGoogle Scholar
Hanson, S. G.; Kashyap, A. K.; and Stein, J. C.. “A Macroprudential Approach to Financial Regulation.” Journal of Economic Perspectives, 25 (2011), 3–28.CrossRefGoogle Scholar
Healy, P. M., and Wahlen, J. M.. “A Review of the Earnings Management Literature and Its Implications for Standard Setting.” Accounting Horizons, 13 (1999), 365–383.CrossRefGoogle Scholar
Hooker, M. A., and Knetter, M. M.. “The Effects of Military Spending on Economic Activity: Evidence from State Procurement Spending.” Journal of Money, Credit, and Banking, 28 (1997), 400–421.CrossRefGoogle Scholar
Houston, J. F.; Lin, C.; and Ma, Y.. “Regulatory Arbitrage and International Bank Flows.” Journal of Finance, 67 (2012), 1845–1895.CrossRefGoogle Scholar
Huizinga, H., and Laeven, L.. “Bank Valuation and Accounting Discretion during a Financial Crisis.” Journal of Financial Economics, 106 (2012), 614–634.CrossRefGoogle Scholar
Imai, K.; King, G.; and Stuart, E. A.. “Misunderstandings between Experimentalists and Observationalists about Causal Inference.” Journal of the Royal Statistical Society: Series A (Statistics in Society), 171 (2008), 481–502.CrossRefGoogle Scholar
Jarrow, R. A. “Credit Market Equilibrium Theory and Evidence: Revisiting the Structural Versus Reduced Form Credit Risk Model Debate.” Finance Research Letters, 8 (2011), 2–7.CrossRefGoogle Scholar
Jarrow, R. A., and Turnbull, S. M.. “Pricing Derivatives on Financial Securities Subject to Credit Risk.” Journal of Finance, 50 (1995), 53–85.CrossRefGoogle Scholar
Jiménez, G.; Ongena, S.; Peydró, J.-L.; and Saurina, J.. “Macroprudential Policy, Countercyclical Bank Capital Buffers, and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments.” Journal of Political Economy, 125 (2017), 2126–2177.CrossRefGoogle Scholar
Jordà, Ò. “Estimation and Inference of Impulse Responses by Local Projections.” American Economic Review, 95 (2005), 161–182.CrossRefGoogle Scholar
Karolyi, G. A.; Sedunov, J.; and Taboada, A. G.. “Cross-Border Bank Flows and Systemic Risk.” Available at https://dx.doi.org/10.2139/ssrn.2938544 (2018).CrossRefGoogle Scholar
Karolyi, G. A., and Taboada, A. G.. “Regulatory Arbitrage and Cross-Border Bank Acquisitions.” Journal of Finance, 70 (2015), 2395–2450.CrossRefGoogle Scholar
Kelly, B. T.; Lustig, H.; and Van Nieuwerburgh, S.. “Too-Systemic-to-Fail: What Option Markets Imply about Sector-Wide Government Guarantees.” American Economic Review, 106 (2016), 1278–1319.CrossRefGoogle Scholar
Keynes, J. M. General Theory of Employment, Interest and Money. New Delhi, India: Atlantic Publishers and Distributors (1937).Google Scholar
Kim, S. “International Transmission of U.S. Monetary Policy Shocks: Evidence from VAR’s.” Journal of Monetary Economics, 48 (2001), 339–372.CrossRefGoogle Scholar
Kleibergen, F., and Paap, R.. “Generalized Reduced Rank Tests Using the Singular Value Decomposition.” Journal of Econometrics, 133 (2006), 97–126.CrossRefGoogle Scholar
Laeven, L., and Levine, R.. “Bank Governance, Regulation and Risk Taking.” Journal of Financial Economics, 93 (2009), 259–275.CrossRefGoogle Scholar
Laeven, L., and Majnoni, G.. “Loan Loss Provisioning and Economic Slowdowns: Too Much, Too Late?” Journal of Financial Intermediation, 12 (2003), 178–197.CrossRefGoogle Scholar
Laeven, L., and Valencia, F.. “Systemic Banking Crises.” In Financial Crises: Causes, Consequences, and Policy Responses. Washington, DC: International Monetary Fund (2014), 61–137.Google Scholar
Laeven, L., and Valencia, F.. Systemic Banking Crises Revisited. Washington, DC: International Monetary Fund (2018).CrossRefGoogle Scholar
Leventis, S.; Dimitropoulos, P. E.; and Anandarajan, A.. “Loan Loss Provisions, Earnings Management and Capital Management Under IFRS: The Case of EU Commercial Banks.” Journal of Financial Services Research, 40 (2011), 103–122.CrossRefGoogle Scholar
Li, J., and Zinna, G.. “On Bank Credit Risk: Systemic or Bank Specific? Evidence for the United States and United Kingdom.” Journal of Financial and Quantitative Analysis, 49 (2014), 1403–1442.CrossRefGoogle Scholar
Maćkowiak, B. “External Shocks, US Monetary Policy and Macroeconomic Fluctuations in Emerging Markets.” Journal of Monetary Economics, 54 (2007), 2512–2520.CrossRefGoogle Scholar
Majumdar, B. “Government Raises Defence Budget after Mumbai Attacks.” Reuters, Feb. 16, 2009, https://in.reuters.com/article/idINIndia-38045420090216.Google Scholar
Merton, R. “Theory of Rational Option Pricing.” Bell Journal of Economics, 4 (1973), 141–183.Google Scholar
Merton, R. C. “On the Pricing of Corporate Debt: The Risk Structure of Interest Rates.” Journal of Finance, 29 (1974), 449–470.Google Scholar
Merton, R. C. “Option Pricing When Underlying Stock Returns Are Discontinuous.” Journal of Financial Economics, 3 (1976), 125–144.CrossRefGoogle Scholar
Moreira, H., and Moreira, M. J.. “Optimal Two-Sided Tests for Instrumental Variables Regression with Heteroskedastic and Autocorrelated Errors.” Journal of Econometrics, 213 (2019), 398–433.CrossRefGoogle Scholar
Moreira, M. J. “A Conditional Likelihood Ratio Test for Structural Models.” Econometrica, 71 (2003), 1027–1048.CrossRefGoogle Scholar
Moreira, M. J. “Tests with Correct Size When Instruments Can Be Arbitrarily Weak.” Journal of Econometrics, 152 (2009), 131–140.CrossRefGoogle Scholar
Morgan, D. P. “Rating Banks: Risk and Uncertainty in an Opaque Industry.” American Economic Review, 92 (2002), 874–888.CrossRefGoogle Scholar
Murataj, R. “Default Risk Spillovers and Intra-Industry Return Predictability.” PhD dissertation, Cornell University (2018). Available at https://doi.org/10.7298/X4NV9GFT.CrossRefGoogle Scholar
Nakaso, H. The Financial Crisis in Japan during the 1990s: How the Bank of Japan Responded and the Lessons Learnt. Basel, Switzerland: Bank for International Settlements (2001).Google Scholar
Nelder, J. A., and Mead, R.. “A Simplex Method for Function Minimization.” Computer Journal, 7 (1965), 308–313.CrossRefGoogle Scholar
Nielsen, L. “Classifications of Countries Based on Their Level of Development: How It Is Done and How It Could Be Done.” Working Paper, International Monetary Fund (2011).CrossRefGoogle Scholar
O’Hara, M., and Shaw, W.. “Deposit Insurance and Wealth Effects: The Value of Being ‘Too-Big-to-Fail’.” Journal of Finance, 45 (1990), 1587–1600.Google Scholar
Ongena, S.; Popov, A.; and Udell, G. F.. “‘When the Cat’s Away the Mice Will Play’: Does Regulation at Home Affect Bank Risk-Taking Abroad?” Journal of Financial Economics, 108 (2013), 727–750.CrossRefGoogle Scholar
Owyang, M. T.; Ramey, V. A.; and Zubairy, S.. “Are Government Spending Multipliers Greater during Periods of Slack? Evidence from Twentieth-Century Historical Data.” American Economic Review, 103 (2013), 129–134.CrossRefGoogle Scholar
Pérez, D.; Salas-Fumás, V.; and Saurina, J.. “Earnings and Capital Management in Alternative Loan Loss Provision Regulatory Regimes.” European Accounting Review, 17 (2008), 423–445.CrossRefGoogle Scholar
Pesme, F. “France’s ‘Return’ to NATO: Implications for Its Defence Policy.” European Security, 19 (2010), 45–60.CrossRefGoogle Scholar
Ramey, V. A. “Identifying Government Spending Shocks: It’s All in the Timing.” Quarterly Journal of Economics, 126 (2011), 1–50.CrossRefGoogle Scholar
Ramey, V. A., and Shapiro, M. D.. “Costly Capital Reallocation and the Effects of Government Spending.” Carnegie-Rochester Conference Series on Public Policy, 48 (1998), 145–194.CrossRefGoogle Scholar
Ramey, V. A., and Zubairy, S.. “Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data.” Journal of Political Economy, 126 (2018), 850–901.CrossRefGoogle Scholar
Reinhart, C. M., and Rogoff, K. S.. “From Financial Crash to Debt Crisis.” American Economic Review, 101 (2011), 1676–1706.CrossRefGoogle Scholar
Romer, C. D., and Romer, D. H.. “A New Measure of Monetary Shocks: Derivation and Implications.” American Economic Review, 94 (2004), 1055–1084.CrossRefGoogle Scholar
Ronn, E. I., and Verma, A. K.. “Pricing Risk-Adjusted Deposit Insurance: An Option-based Model.” Journal of Finance, 41 (1986), 871–895.CrossRefGoogle Scholar
Rotemberg, J. J., and Woodford, M.. “An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy.” NBER Macroeconomics Annual, 12 (1997), 297–346.CrossRefGoogle Scholar
Sargent, T. J. “A Primer on Monetary and Fiscal Policy.” Journal of Banking and Finance, 23 (1999), 1463–1482.CrossRefGoogle Scholar
Sarkar, A.; Subramanian, K.; and Tantri, P.. “Effects of CEO Turnover in Banks: Evidence Using Exogenous Turnovers in Indian Banks.” Journal of Financial and Quantitative Analysis, 54 (2019), 183–214.CrossRefGoogle Scholar
Schularick, M., and Taylor, A. M.. “Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870–2008.” American Economic Review, 102 (2012), 1029–61.CrossRefGoogle Scholar
Simons, S. “Sarkozy Breaks with De Gaulle and Tradition.” Spiegel Online, (2009).Google Scholar
Stern, G. H., and Feldman, R. J.. Too Big to Fail: The Hazards of Bank Bailouts. Washington, DC: Brookings Institution Press (2004).Google Scholar
Tavares, J. “Does Right or Left Matter? Cabinets, Credibility and Fiscal Adjustments.” Journal of Public Economics, 88 (2004), 2447–2468.CrossRefGoogle Scholar