行业报告国际清算银行外汇市场主权风险与银行贷款：1999年土耳其地震的证据英20234.docx

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1、OBISBISWorkingPapersNo1093Sovereignriskandbank1ending:evidencefrom1999TurkishearthquakebyYusufSonerBaSkaya,BryanHardy,$ebnemKa1em1i-OzcanandVivianYueMonetaryandEconomicDepartmentApri12023JE1c1assification:E32,F15fF36,016.Keywords:bankingcrisis,bankba1ancesheets,1endingchanne1pub1icdebt,creditsupp1y,

2、sovereign-banknexus.BISWorkingPapersarewrittenbymembersoftheMonetaryandEconomicDepartmentoftheBankforInternationa1Sett1ements,andfromtimetotimebyothereconomists,andarepub1ishedbytheBank.Thepapersareonsubjectsoftopica1interestandaretechnica1incharacter.Theviewsexpressedinthemarethoseoftheirauthorsand

3、notnecessari1ytheviewsoftheBIS.Thispub1icationisavai1ab1eontheBISwebsite(BankforInternationa1Sett1ements2023.A11rightsreserved.Briefexcerptsmaybereproducedortrans1atedprovidedthesourceisstated.ISSN1020-0959(print)ISSN1682-7678(on1ine)SovereignRiskandBank1ending:Evidencefrom1999TurkishEarthquake*Yusu

4、fSonerBaskaya+BryanHardy*SebnemKa1em1i-OzcanVivianYUe,WethankDaronAcemog1u,MarkAguiar,KorayA1per,CristinaAre11ano,ErdemBasci,JavierBianchi,V.V.Chari,StijnC1aessens,Giancar1oCorsetti,Raque1Fernandez,Jose1ouisDe-Peydro,1indaGo1dberg,AnneKrueger,A1bertoMartin,AtifMian,Pab1oOttone11o,RadekPa1uszynski,Ri

5、chardPortes,KenRogoff,1arryWa11,andtheparticipantsatvariousconferencesfortheircomments.Theviewsexpressedinthispaperdonotnecessari1yrepresentthoseoftheinstitutionsthattheauthorsareaffi1iatedwith.tUniversityofG1asgow,AdamSmithBusinessSchoo1,e-mai1:soner.baskayag1asgow.ac.uktBankforInternationa1Sett1em

6、ents,e-mai1:bryan.hardybis.org5UniversityofMary1and,CEPRandNBER.e-mai1:ka1em1iumd.eduCorrespondingAuthor.EmoryUniversity,FEDAt1anta,CEPRandNBER.e-mai1:vyueemory.eduMarch2023AbstractWeuseanexogenousfisca1shocktoidentifythetransmissionofgovernmentrisktobank1endingduetobanksho1dinggovernmentbonds.Wei11

7、ustratewithatheoretica1mode1thatforbankswithhigherexposuretogovernmentbonds,ahighersovereigndefau1triskimp1ies1owerbanknetworthand1ess1ending.Ourempirica1estimatesconfirmthemodespredictions.Theexogenouschangeinsovereigndefau1triskofTurkishgovernmentdebtasaresu1tofthe1999Earthquakeimpactsbankswhoseba

8、1ancesheetswereexposedmoretogovernmentbonds.Theresu1ting1owerbanknetworthtrans1atesinto1owercreditsupp1y.Weru1eouta1ternativeexp1anations.Ourestimatessuggestthischanne1canexp1ainha1fofthedec1ineinbank1endingfo11owingtheearthquake.Thisunder1inestheimportanceofthebankba1ance-sheetchanne1intransmitting

9、ahighersovereigndefau1trisktoreducedrea1economicactivity.JE1:E32,F15,F36,016Keywords:bankingcrisis,bankba1ancesheets,1endingchanne1,pub1icdebt,creditsupp1y,sovereign-banknexusIIntroductionFinancia1institutionsp1ayapivota1ro1einsupp1yingcreditbothtorea1sectorandsovereigngovernments.1endingtotheirOwns

10、overeignsincreasestheexposureofdomesticfinancia1institutionstosovereignrisk.Sovereigngovernmentsmost1yborrowfromdomesticresidents(ReinhartandRogoff(2009),TomzandWright(2013),AguiarandAmador(2014),andFang,Hardy,and1ewis(2023).Anincreaseinsovereignriskconstitutesadirectba1ancesheetshocktothebanksthath

11、o1dsovereigndebt(Gennaio1i,Martin,andRossi(2014),Boco1a(2016),Are11ano,Bai,andBoco1a(2023),More11i,Ottone11o,andPerez(2023).Thedec1ineinassetva1uereducesbanknetworth,whichcanthenconstrainbankborrowingand1ending.Highersovereignriskcana1soaffectbanks,financia1performancebyreducingtheco11atera1va1ueoft

12、hesovereignbondsandtherebybanks,abi1itytosecurefunding.Theseconcernsp1ayedoutmostnotab1yinthe2012Eurozonecrisis.However,thesurgeingovernmentborrowingacrossbothadvancedandemergingmarkets,spurredbytheCovid-19crisis,hasbroughtthembacktothefore(HardyandZhu(2023).Neverthe1ess,quantifyingtheeffectofsovere

13、ignriskonbankba1ancesheetsandcreditprovisionisacha11engingtask.Inparticu1ar,itisdifficu1ttoidentifyacausa1re1ationshipbetweensovereignriskandbankingsectordistressfrombank-sovereigndoom1pepisodes,under1inedbythewe11-knownfactsofthecoincidenceofsovereigncrisesandbankingcrises(ReinhartandRogoff(2009),F

14、irst,sovereignriskcanincreaseendogenous1yduetoweakbanks.Inthepresenceoffinancia1crises,banksunderfinancia1stressfaceinso1vencyrisk,whichcanresu1tintheneedforagovernmentbai1out.Asgovernmentsrecapita1izebankstobackstopthefinancia1system,functioningasa1enderof1astresort,thebai1outsincreasetheirfisca1bu

15、rdenandsocanincreasesovereignrisk(Acharya,Drechs1er,andSchnab1(2014).Second,bankba1ancesheetshocksaremost1yanticipatedandunfo1dsimu1taneous1ywiththesovereigndebtcrisis.Forexamp1e,bankscanactive1ymanagetheirba1ancesheetsbybuying/se11inggovernmentbondsinresponsetochangesinsovereignrisk.Furthermore,the

16、va1ueoftheexistinggovernmentbondsmaynotchangeonthebankba1ancesheetevenwhensovereignratingsgodown,ifbanksarerecordinga11assetsatbookva1ue(e.g.he1d-to-maturitysecuritiesinthebankingbook).Inthiscase,theshocktobankba1ancesheetsmaynotbeobservedinthedata.Abankwi11changeitsbehaviorintermsofprivatesector1endinggiventhe1owermarketva1ueofbonds,butthechangeintheva1ueofthebondsmaynotbeobservedontheba1ancesheet.Inthiscase,onecanerro