by Stefan Avdjiev, Bryan Hardy, Maximilian Jager<br />This paper documents that the traditional sovereign-bank nexus has morphed into a broader nexus that now also includes non-bank financial institutions (NBFIs): the sovereign-bank-NBFI nexus. The classical sovereign-bank nexus has been a major financial stability concern following the eurozone crisis. Since then, sovereign debt levels have increased substantially in many major economies, while NBFIs’ footprint in sovereign bond markets has grown significantly.
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