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Sovereigns and banks in the euro area: A tale of two crises



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Gómez-Puig, Marta y Sosvilla-Rivero, Simón y Singh, Manish K. (2015) Sovereigns and banks in the euro area: A tale of two crises. [ Working Papers on International Economics and Finance; nº 15-01, ISSN: 1696-6376 ]

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This study attempts to identify and trace inter-linkages between sovereign and banking risk in the euro area. To this end, we use an indicator of banking risk in each country based on the Contingent Claim Analysis literature, and 10-year government yield spreads over Germany as a measure of sovereign risk. We apply a dynamic approach to testing for Granger causality between the two measures of risk in 10 euro area countries, allowing us to check for contagion in the form of a significant and abrupt increase in short-run causal linkages. The empirical results indicate that episodes of contagion vary considerably in both directions over time and within the different EMU countries. Significantly, we find that causal linkages tend to strengthen particularly at the time of major financial crises. The empirical evidence suggests the presence of contagion, mainly from banks to sovereigns.

Tipo de documento:Documento de trabajo o Informe técnico
Palabras clave:Sovereign debt crisis; Banking crisis; Granger-causality; Time-varying approach; Distance-to-default; Euro area
Materias:Ciencias Sociales > Economía > Bancos y cajas
Ciencias Sociales > Economía > Crisis económicas
Ciencias Sociales > Economía > Econometría
Ciencias Sociales > Economía > Economía internacional
Ciencias Sociales > Economía > Economía pública
Ciencias Sociales > Economía > Finanzas
Ciencias Sociales > Economía > Integración económica
JEL:C22, E44, G01, G13, G21
Título de serie o colección:Working Papers on International Economics and Finance
Código ID:30626
Depositado:02 Jul 2015 08:55
Última Modificación:19 Dic 2018 09:59

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