Emmanouil Sfakianakis , Maastricht Graduate School of Governance
This study covers two main determinants of public exposures: guarantees as a common element in PPP contracts and as a major crisis intervention. In the first part, Emmanouil Sfakianakis introduces the aspect of negative net cash flows that result from government PPP guarantees, which increase the probability of default (extending the debt position) of a said country. He also calculates the mid-market CDS spread and, thus, evaluate the price of the public risk in a PPP. In the second part, he analyzes different aspects of PPPs as a policy tool in a banking crisis. Sfakianakis finds that measures which concern asset and equity side management are very influential and difficult to assess. This is because macroeconomic shocks complicate the valuation of bank assets and the bank itself as a firm. Guarantees, on the other hand, can be efficiently used to tackle a crisis, since they are essential to restore market actors’ trust, while maximum public exposures are well known.
Venue: Minderbroedersberg 4-6, Maastricht
Date: 25 May 2011
Time: 14:00 - 15:30