ABSTRACT
We empirically investigate the effects of government debt on banks’ risk-taking by using a dataset covering 10,122 banks located in 65 countries between 2009 and 2019. We find that a greater supply of government debt can increase risk-taking of banks. This positive relation is stronger for domestic government debt, or for banks with higher level of capitalization and loans to deposits.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1. In addition, the collateral and the balance sheets mechanisms have been evidenced by our empirical results (available on request).