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
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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/

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