PMC

Expected composition of Italian debt (2019–2023). Source: Own elaboration based on IMF data and Italian Treasury data. In order to build the debt composition for 2020–2023, we started with IMF forecasts for the total stock of debt and then assumed that the shares of loans and BOT remain constant. Data for external debt, and domestic bonds are instead taken from the flow of maturing bonds data used for . The graph is built under the conservative assumption that no external bonds will be issued in the next three years; while Italy issued dollar bonds in October 2019, this was a small amount ($7 billion) and these issuances—and possible future external issuances—are unlikely to substantially change the figure given their relatively small amount.

(a) We split data into three phases: (1) Beginning of the crisis (from August, 2007 until April, 2008), where the FED's exposure is below USD 20 billion; (2) Plateau (April, 2008 till October 2008), where the exposure raises and stays around 380 billion for 3 months; (3) Peak and decline (October, 2008 until April, 2010), where the exposure peaks in a short span of time and starts to decline at a slower rate, due to a parallel toxic asset purchasing program (see , Section 3) We have chosen ten representative periods of 30 days, as shown in the inset. For each period, debt values across days were pooled together in order to increase the statistics (under the assumption that such data are generated by the same stochastic process). The main plot shows the empirical complementary cumulative distributions of outstanding debt, computed in each of the 10 periods. For each distribution, the values of debt are rescaled by the total debt across institutions in that period. Note that distributions within the same phase look similar. (b) The debt of the top 100 institutions (by average debt) is represented as a topographic map where the color indicates the debt of each institution as a percentage of its own maximum debt: from green to yellow, to red (respectively, 0-30%, 30-70%, 70-100%). The institutions are sorted by their peak date, from upper left to bottom: institutions having an earlier peak are in the upper left corner of the plot. The inset figure shows an histogram counting how many institutions were in their peak of debt during each month. Note that in the worst case almost 30 institutions where in their maximum level of debt at the same time, thus indicating a high degree of synchronicity.

Net tax benefit of debt by country and year, 2002–2012. This figure shows the net tax benefit of debt calculated following the approach of Gordon and MacKie-Mason (). Tax rates are taken from Table  and results are based on the assumption that half of the firm’s profits are distributed as dividends, thus d = 0.5 and α = 0.5

Residual stock of bonds without collective action clauses (2019–2040) (million euro). Source: Own elaborations based on Italian Treasury data ending in September 2019. The graph is based on bonds issued before 1 October 2019. No assumption is made about the rollover of existing bonds. The graph is built under the assumption that bonds issued before 2013 do not have CACs and that external bonds do not have CACs, with the exception of EMTN issued after 2012 (the outstanding stock of EMTN with CAC is €6.8 billion).