Financial sector rescue programs: Domestic and cross border effects

Christian Glocker and Thomas Url

Journal of International Money and Finance, 2022, vol. 127, issue C

Abstract: We assess the effectiveness of the financial sector stabilisation measures taken by the Austrian authorities in the wake of the global financial crisis. Employing an event study methodology, we evaluate domestic and cross-border effects involving Central, Eastern and South-eastern European economies. We identify recapitalisations and public guarantees as the most effective sovereign interventions. Both mitigate financial market stress at home and abroad. However, a risk-shifting effect emerges at the sovereign’s expense which undermines their effectiveness relative to monetary policy interventions. Moreover, in complement to the actual implementation, the mere announcement of interventions already mitigates financial market stress, underscoring the extent of policy credibility.

Keywords: Financial market stress; Spillovers and financial contagion; Policy interventions; Event study analysis; Interacted Bayesian VAR (search for similar items in EconPapers)
JEL-codes: E58 E65 G14 G18 G28 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:127:y:2022:i:c:s0261560622000973

DOI: 10.1016/j.jimonfin.2022.102694

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