Drivers of Bank Holdings of Sovereign Debt in Emerging MarketsSources: Bloomberg Finance L.P.; Fitch Connect; IHS Markit; IMF, Monetary and Financial Statistics and World Economic Outlook databases; Standard & Poor’s Capital IQ; and IMF staff calculations.Note: Panel 1 presents results obtained from a cross-country regression for a sample of 21 emerging markets during 2000–20. Aggregate banks’ government debt holdings are computed from Fitch Connect if data from Monetary and Financial Statistics are limited. The dependent variable is banks’ holdings of sovereign debt to total banking sector assets. The bars show the effect of a one standard deviation increase in the value of the regressors on changes in banks’ holdings (in percentage points). Panel 2 presents regression results from a bank-level cross-country regression during 2011–20. The dependent variable is banks’ net purchases of sovereign debt. (See Online Annex 2.4 for the model and estimation details.) Moral suasion is defined as the additional purchase of sovereign debt by state-owned banks in times of “high fiscal need” that is, the years when the total amount of new debt auctioned by the sovereign (proxied by maturing debt as a share of lagged gross debt) is above the 75th percentile in the sample. Risk shifting is defined as the additional purchases of sovereign debt by less-capitalized state-owned banks, where “less capitalized” refers to an equity-to-assets ratio that is one standard deviation below the mean, which is about 7 percentage points. Solid bars indicate statistical significance at 10 percent or lower.