SELECTED WORKS
of Jaime Luque
Publications
The Repo Channel of Cross-Border Lending in the European Sovereign Debt Crisis
Journal of Financial Markets (2022)Jaime Luque
ABSTRACT
We build an equilibrium model of cross-border lending to understand how shocks to repo funding and leverage induce banks to reallocate credit by region and asset type during the European sovereign debt crisis of 2010-2013. A higher collateral risk on lower-rated sovereigns induces banks to fly to liquid collateral. Banks in the periphery sovereign crisis region with worse funding conditions rebalance their loan portfolios toward risky illiquid sovereigns.
The European Central Bank’s Long Term Refinancing Operations program stands as a mechanism whereby optimistic banks carried out the successful policy of the ECB to tamp down euro redenomination risk.
DISCIPLINES
Economic Theory, Finance and Public Economics
PUBLICATION DATE
2022
DOI
https://doi.org/10.1016/j.finmar.2021.100679
CITATION INFORMATION
Jaime Luque. "The Repo Channel of Cross-Border Lending in the European Sovereign Debt Crisis" Journal of Financial Markets Vol. 59 (2022) p. 1 - 17
Available at: http://works.bepress.com/luque/30/
CREATIVE COMMONS LICENSE
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