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What drives banks’ appetite for sovereign debt in CEE countries?
Article | Year: 2020 | Pages: 179 - 201 | Volume: 42 | Issue: 2 Received: June 1, 2019 | Accepted: November 18, 2019 | Published online: June 1, 2020
|
FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
PDF
Source: ECB SDW; Eurostat.
|
Category
|
Variable
|
Unit
|
Source
|
Expected effect
|
Mechanism
|
|
Dependent
variable
|
Sovereign
debt securities
|
% change
|
ECB Statistical Data Warehouse
|
|
|
|
Main
explanatory variables
|
Budget deficit
Change in public debt
|
% of GDP
|
Eurostat
|
+
|
Rise in deficit increases financing needs of the government, which leads
to higher supply of government bonds.
|
|
Yields
spreads
|
%
|
Eurostat
|
+
|
Higher yields on local government bonds make them more attractive for
banks.
|
|
Capital
adequacy ratio (CAR)
|
%
|
IMF Financial Soundness Indicators
|
+
|
Banks are motivated to hold debt securities to improve their CAR.
|
|
Private
sector loans
|
% change
|
ECB Data Warehouse
|
-
|
Rising of corporate loans indicates that banks see investment
opportunities in private sector
|
|
GDP
|
growth rate %
|
Eurostat
|
-
|
Stronger GDP growth has positive effect on demand for loans from private
sector, i.e. during expansions banks have more investment opportunities.
|
|
Control
variables
|
Exposure
|
%
|
Eurostat
|
-
|
Higher exposure to sovereign debt in previous period reduces the
absorption capacity for additional sovereign bonds in banks’ balance sheets.
|
|
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
|
Deficit
|
1.771***
|
1.771***
|
|
|
|
|
|
(0.271)
|
(0.271)
|
|
|
|
|
|
Change
in debt
|
|
|
3.300***
|
3.300***
|
|
|
|
|
|
(0.719)
|
(0.719)
|
|
|
|
Yield
|
0.0688
|
|
0.559
|
|
0.328
|
|
|
(0.838)
|
|
(0.993)
|
|
(0.991)
|
|
|
Spread
|
|
0.0688
|
|
0.559
|
|
0.328
|
|
|
(0.838)
|
|
(0.993)
|
|
(0.991)
|
|
Loans
growth
|
-0.0251**
|
-0.0251**
|
-0.0260**
|
-0.0260**
|
|
|
|
(0.0119)
|
(0.0119)
|
(0.0125)
|
(0.0125)
|
|
|
|
GDP
growth
|
|
|
|
|
-0.758**
|
-0.758**
|
|
|
|
|
|
(0.363)
|
(0.363)
|
|
CAR
(lagged)
|
0.277***
|
0.277***
|
0.175
|
0.175
|
0.226**
|
0.226**
|
|
(0.0969)
|
(0.0969)
|
(0.109)
|
(0.109)
|
(0.106)
|
(0.106)
|
|
Exposure
(lagged)
|
-1.716***
|
-1.716***
|
-1.316***
|
-1.316***
|
-1.740***
|
-1.740***
|
|
(0.324)
|
(0.324)
|
(0.354)
|
(0.354)
|
(0.394)
|
(0.394)
|
|
_cons
|
12.10
|
11.83
|
13.45
|
11.22
|
20.57**
|
21.89**
|
|
(8.382)
|
(7.903)
|
(9.146)
|
(8.599)
|
(10.44)
|
(9.876)
|
|
Country
FE
|
YES
|
YES
|
YES
|
YES
|
YES
|
YES
|
|
Time FE
|
YES
|
YES
|
YES
|
YES
|
YES
|
YES
|
|
N
|
286
|
286
|
286
|
286
|
286
|
286
|
* p < 0.1, ** p < 0.05, *** p < 0.01. Source: Authors.
|
t-Test: Two-Sample Assuming
Unequal Variances
|
|
|
Mean (%)
|
7.6
|
13.6
|
|
Variance (%)
|
0.05
|
0.20
|
|
Observations
|
103
|
311
|
|
Hypothesized Mean Difference
|
0.00
|
|
|
df
|
350
|
|
|
t Stat
|
-17.93
|
|
|
P(T<=t) two-tail
|
0.00
|
|
|
t Critical two-tail
|
1.97
|
|
|
|
(1)
|
(2)
|
(3)
|
|
Deficit
|
1.763***
|
|
|
|
(0.257)
|
|
|
|
Change
in debt
|
|
3.245***
|
|
|
|
(0.705)
|
|
|
Loans
growth
|
-0.0250**
|
-0.0259**
|
|
|
(0.0119)
|
(0.0125)
|
|
|
GDP
growth
|
|
|
-0.767**
|
|
|
|
(0.364)
|
|
CAR
(lagged)
|
0.278***
|
0.178*
|
0.217**
|
|
(0.0965)
|
(0.107)
|
(0.108)
|
|
Exposure
(lagged)
|
-1.701***
|
-1.293***
|
-1.785***
|
|
(0.316)
|
(0.353)
|
(0.403)
|
|
_cons
|
11.80
|
11.19
|
22.00**
|
|
(7.939)
|
(8.585)
|
(10.01)
|
|
Country
Fe
|
YES
|
YES
|
YES
|
|
Time FE
|
YES
|
YES
|
YES
|
|
N
|
286
|
286
|
286
|
* p < 0.1, ** p < 0.05, *** p < 0.01. Source: Authors.
|
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
|
Deficit
|
2.794***
|
2.794***
|
|
|
|
|
|
(0.651)
|
(0.651)
|
|
|
|
|
|
Change
in debt
|
|
|
2.284**
|
2.284**
|
|
|
|
|
|
(1.058)
|
(1.058)
|
|
|
|
Yield
|
1.266
|
|
0.765
|
|
0.264
|
|
|
(1.443)
|
|
(1.457)
|
|
(1.468)
|
|
|
Spread
|
|
1.266
|
|
0.765
|
|
0.264
|
|
|
(1.443)
|
|
(1.457)
|
|
(1.468)
|
|
Loans
growth
|
-0.0343**
|
-0.0343**
|
-0.0295**
|
-0.0295**
|
|
|
|
(0.0141)
|
(0.0141)
|
(0.0148)
|
(0.0148)
|
|
|
|
GDP growth
|
|
|
|
|
-0.464
|
-0.464
|
|
|
|
|
|
(0.446)
|
(0.446)
|
|
CAR
(lagged)
|
0.229**
|
0.229**
|
0.157
|
0.157
|
0.201*
|
0.201*
|
|
(0.101)
|
(0.101)
|
(0.111)
|
(0.111)
|
(0.115)
|
(0.115)
|
|
Exposure
(lagged)
|
-3.169***
|
-3.169***
|
-2.570***
|
-2.570***
|
-2.687***
|
-2.687***
|
|
(0.529)
|
(0.529)
|
(0.562)
|
(0.562)
|
(0.555)
|
(0.555)
|
|
_cons
|
24.75***
|
19.69**
|
21.06**
|
18.00**
|
25.54**
|
24.49**
|
|
(9.289)
|
(8.362)
|
(9.958)
|
(8.797)
|
(11.14)
|
(10.00)
|
|
Country
FE
|
YES
|
YES
|
YES
|
YES
|
YES
|
YES
|
|
Time FE
|
YES
|
YES
|
YES
|
YES
|
YES
|
YES
|
|
N
|
219
|
219
|
219
|
219
|
219
|
219
|
Standard errors in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01. Source: Authors.
|
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
|
Deficit
|
1.795***
|
1.795***
|
|
|
|
|
|
(0.486)
|
(0.486)
|
|
|
|
|
|
Change
in debt
|
|
|
3.849***
|
3.849***
|
|
|
|
|
|
(0.792)
|
(0.792)
|
|
|
|
Yield
|
0.786
|
|
2.172*
|
|
1.191
|
|
|
(1.430)
|
|
(1.299)
|
|
(1.480)
|
|
|
Spread
|
|
0.786
|
|
2.172*
|
|
1.191
|
|
|
(1.430)
|
|
(1.299)
|
|
(1.480)
|
|
Loans
growth
|
-0.0331**
|
-0.0331**
|
-0.0348**
|
-0.0348**
|
|
|
|
(0.0158)
|
(0.0158)
|
(0.0159)
|
(0.0159)
|
|
|
|
GDP
growth
|
|
|
|
|
-0.640
|
-0.640
|
|
|
|
|
|
(0.495)
|
(0.495)
|
|
CAR
(lagged)
|
1.908**
|
1.908**
|
0.722
|
0.722
|
1.367
|
1.367
|
|
(0.919)
|
(0.919)
|
(0.903)
|
(0.903)
|
(1.009)
|
(1.009)
|
|
Exposure
(lagged)
|
-1.811***
|
-1.811***
|
-1.154***
|
-1.154***
|
-1.612***
|
-1.612***
|
|
(0.369)
|
(0.369)
|
(0.318)
|
(0.318)
|
(0.385)
|
(0.385)
|
|
_cons
|
13.41
|
10.01
|
27.74*
|
18.34
|
25.00
|
19.84
|
|
(15.23)
|
(12.95)
|
(15.00)
|
(12.97)
|
(16.75)
|
(14.72)
|
|
Country
FE
|
YES
|
YES
|
YES
|
YES
|
YES
|
YES
|
|
Time FE
|
YES
|
YES
|
YES
|
YES
|
YES
|
YES
|
|
N
|
227
|
227
|
227
|
227
|
227
|
227
|
Standard errors in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01. Source: Authors.
|
|
June, 2020
II/2020
|
