GOVERNMENT DEBT AND BANKING FRAGILITY: THE SPREADING OF STRATEGIC UNCERTAINTY
研究政府债务与金融市场之间的“恶魔循环”，即政府救助银行的预期促使银行持有政府债务而非通过股权缓冲自我保险，并分析银行股权发行在决定该循环是否为纳什均衡中的作用。
Abstract This article studies the interaction of government debt and financial markets. This interaction, termed a “diabolic loop,” is driven by government choice to bail out banks and the resulting incentives for banks to hold government debt instead of self‐insure through equity buffers. We highlight the role of bank equity issuance in determining whether the “diabolic loop” is a Nash equilibrium of the interaction between banks and the government. When equity is issued, no diabolic loop exists. In equilibrium, banks' rational expectations of a bailout ensure that no equity is issued and the sovereign‐bank loop is operative.