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Browsing by Author "Stefanidis, Georgios"

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    Essays in International Financial Economics and Bank Regulation
    (2017-06) Stefanidis, Georgios
    My thesis consists of three chapters where I study topics in international financial economics and bank regulation. First chapter: European countries were seen increasing their debt positions during the debt crisis of 2009-2012. This is particularly true for countries whose debt level and government spending prior to the crisis were high. This observation is rationalized here by building a simple ``default'' model. The main feature of this model is that of convex adjustment costs on government spending which make it such that countries are willing to finance smoother reductions in spending by borrowing. Some interesting features of this model are highlighted, including the fact that countries that eventually exit the crisis by reducing their debt initially borrow to finance a smooth reduction in spending. Second chapter: In 1989, the IMF altered its long-standing policy on loans to sovereign nations and began lending to sovereigns who were in arrears, i.e., countries with past due debt. I document that the fraction of sovereigns falling back into default after a rescheduling of their debt more than halved after the 1989 policy was introduced. At the same time, write-offs on defaulted debts doubled. Using a model where the willingness of sovereigns to repay their debts fluctuates, I show that this policy shift can account for these two facts. It has been maintained by the IMF that this policy benefited both sovereigns and lenders. My model shows that such a policy shift actually benefits sovereigns at the expense of lenders. Third chapter: The goal of this paper is to provide an evaluation of the impact of changing capital requirements on US banking system. In particular, we study the extent to which raising capital requirements improves the resiliency of US financial institutions in the face of a severe financial shock like the 2008 crisis. Improving the resiliency of these institutions in turn makes the need for another public bailout of the financial system less likely.