Gennaioli, NicolaMartin, Alberto, 1974-Rossi, Stefano2019-05-272019-05-272018Gennaioli N, Martin A, Rossi S. Banks, government bonds, and default: what do the data say?. Journal of Monetary Economics. 2018 Oct;98:98-113. DOI: 10.1016/j.jmoneco.2018.04.0110304-3932http://hdl.handle.net/10230/37296This paper analyzes sovereign bondholdings by 20,000 banks in 191 countries and 20 sovereign default episodes over 1998–2012, establishing two robust facts. First, banks hold many government bonds (on average 9% of assets) in normal times, particularly banks making fewer loans and operating in less financially-developed countries. Second, during default years, banks with the average exposure to government bonds exhibit a lower growth rate of loans than banks without bonds (7-percentage points lower). These results indicate that the “dangerous embrace” between banks and their government plays a key role during sovereign defaults and its strength depends on local conditions.application/pdfeng© 2018 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license.info:eu-repo/semantics/articlehttp://dx.doi.org/10.1016/j.jmoneco.2018.04.011Sovereign RiskSovereign DefaultGovernment Bondsinfo:eu-repo/semantics/openAccess