One crisis, two crises…the subprime crisis and the European sovereign debt problems

Loredana Ureche-Rangau and Aurore Burietz

Economic Modelling, 2013, vol. 35, issue C, 35-44

Abstract: This article explores the link between the subprime crisis and the European sovereign debt crisis. Using a panel data approach, we estimate the impact of the different government interventions aimed at rescuing financial institutions on the significant increase of the costs of public debts as measured by the interest rate spreads with respect to Germany. We show evidence on the existence of a statistically significant link between the two crises embodied by capital injections and government guarantees. More specifically, the two types of government interventions have a negative impact on the cost of the sovereign debts under study. This empirical result can explain why the sovereign debt crisis immediately followed the subprime crisis.

Keywords: Financial crisis; Government interventions; European sovereign debt; Dynamic panel (search for similar items in EconPapers)
JEL-codes: E01 G01 G20 G28 H12 H63 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999313002447
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:35-44

DOI: 10.1016/j.econmod.2013.06.026

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().