NBER

Nuno Coimbra

Paris School of Economics
48, Boulevard Jourdan
75014 Paris
France

E-Mail: nuno.coimbra@psemail.eu
Institutional Affiliation: Paris School of Economics

NBER Working Papers and Publications

June 2019Sovereigns at Risk: A Dynamic Model of Sovereign Debt and Banking Leverage
in NBER International Seminar on Macroeconomics 2019, Kristin Forbes and Pierre-Olivier Gourinchas, organizers
This paper develops a dynamic model with heterogeneous investors and sovereign default to analyze the dynamic link between banking sector capitalization and sovereign bond yields. The banking sector is modelled as operating under a Value-at-Risk (VaR) constraint, which can bind occasionally. As default risk rises, the constraint may bind, generating a fall in demand for sovereign bonds that can be accompanied by a rise in the risk premium if other agents are more risk averse. In turn, the rise in risk premium leads to a feedback effect through debt accumulation dynamics and the probability of government default.
March 2017Financial Cycles with Heterogeneous Intermediaries
with Hélène Rey: w23245
This paper develops a dynamic macroeconomic model with heterogeneous financial intermediaries and endogenous entry. It features time-varying endogenous macroeconomic risk that arises from the risk-shifting behaviour of the cross-section of financial intermediaries. We show that when interest rates are high, a decrease in interest rates stimulates investment and increases financial stability. In contrast, when interest rates are low, further stimulus can increase aggregate risk while inducing a fall in the risk premium. In this case, there is a trade-off between stimulating the economy and financial stability.

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