Filippo Gori, 07 October 2021

Once again, the US finds itself in the midst of a debt ceiling crisis, but what can we learn from previous instances? This column assesses the impact of the 2011 US debt ceiling crisis on US federal government credit risk and on US banks’ funding costs. It estimates that during the first two quarters of 2011, as a result of the disagreement between Republicans and Democrats over the rise in the US debt ceiling, US government credit default swaps increased by 46 basis points, while bank funding costs increased by about 18 basis points.  

Alexander Schäfer, Isabel Schnabel, Beatrice Weder di Mauro, 02 August 2013

Lax financial-sector regulation was the fulcrum of the Global Crisis and policymakers reacted by introducing sweeping reforms. But has it had any impact? This column reviews evidence from bank stock returns showing that four major reforms in the US and Europe have reduced bailout expectations – especially for systemic banks. The strongest effects were found for the Dodd-Frank Act (especially the Volcker rule); the German restructuring law had little effect.

Joshua Aizenman, Yothin Jinjarak, Donghyun Park, 14 July 2013

The Global Crisis hit sovereign credit ratings in very different ways. This column discusses research into the determinants of emerging markets’ sovereign credit-default swap spreads from 2004 to 2012. The key factors are trade openness and state fragility in the pre-Crisis period, external debt/GDP ratio and inflation in the Crisis period, and inflation and public debt/GDP ratio in the post-Crisis period. Asian countries enjoy lower sovereign spreads than Latin American countries, and this gap widened during and after the Crisis.

Events

CEPR Policy Research