An investigation into feedback and spatial relationships between banks’ share prices and sovereign bond spreads during the euro crisis

Heather Gibson, Stephen Hall, Pavlos Petroulas and George Tavlas

Journal of Financial Stability, 2022, vol. 63, issue C

Abstract: We examine (1) spillover effects between euro-area sovereigns and banking systems within national jurisdictions and (2) cross-country spillovers among ten countries during the euro-area crisis. We find that cross-country spillovers substantially amplify the doom loops between the sovereign and banking sectors. We also provide a test that supports the hypothesis that cross-country spillovers among southern-euro-area countries were of a different order from the spillovers among northern-euro-area countries. Our results also imply that, if shocks are idiosyncratic, spillover effects may help in reducing the impact for northern countries.

Keywords: Euro area crisis; doom loops; cross-country spillovers; spatial estimation (search for similar items in EconPapers)
JEL-codes: E3 G01 G21 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:63:y:2022:i:c:s157230892200078x

DOI: 10.1016/j.jfs.2022.101056

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