My paper “The Invisible Hand of the Government” accepted for American Economic Journal – Macroeconomics

My paper “The Invisible Hand of the Government: Moral Suasion during the European Sovereign Debt Crisis” written jointly with Steven Ongena and Alexander Popov has been accepted for the American Economic Journal – Macroeconomics. Using a novel two-layered identification strategy we provide evidence of moral suasion affecting government bond markets during the European sovereign debt crisis. During the height of the sovereign debt crisis, domestic banks were more likely than foreign banks to purchase domestic sovereign bonds during months in which the government needed to roll over a relatively large amount of maturing debt. Domestic banks that received government support, are small or with weaker balance sheets were particularly susceptible to moral suasion. Governance of banks played less of a role.

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