What Drives the Sovereign-Bank Nexus?

Isabel Schnabel and Ulrich Schüwer

VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking from Verein für Socialpolitik / German Economic Association

Abstract: The positive relationship between bank and sovereign credit risk in the Eurozone is seen as a major threat for the stability of the Eurozone. This paper explores potential bank-level and country-level drivers of this relationship. We find that banks' home bias in their sovereign exposures and their low equity ratios as well as countries' high debt-to-GDP ratios and low perceived government effectiveness are positively related to the sovereign-bank nexus.

JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ban and nep-eec
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc17:168259

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