Foreign banks can reduce harm of ‘doom loop’ – ECB paper

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The presence of foreign banks in eurozone countries likely mitigates the effect of the “doom loop”, a working paper published by the European Central Bank finds.

The “doom loop” refers to the way in which problems with a country’s sovereign debt can seriously disrupt its credit market. In Foreign banks and the doom loop, Ugo Albertazzi, Jacopo Cimadomo and Nicolò Maffei-Faccioli note that foreign banks can have contrasting impacts on the doom loop. 

They investigate these effects in the

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