EconPapers    
Economics at your fingertips  
 

A non-linear analysis of the sovereign bank nexus in the EU

Giulio Cifarelli () and Giovanna Paladino

The Journal of Economic Asymmetries, 2020, vol. 21, issue C

Abstract: We investigate the time varying dynamics of the linkages between sovereign and bank default risks over the period 2006–2015, using the credit default swap (CDS) spreads of the bonds of major banks and sovereign issuers in the EMU. The nexus between bank risk in core countries and sovereign risk of peripheral countries is also analyzed and found to be relevant. The use of a time-varying regime switching analysis, the STCC-GARCH, identifies the asymmetric impact of the economic variables behind the state shifts, the so-called “transition variables”. This approach also dates both the positive shifts in the size of the nexus that are due to financial shocks (viz. the Lehman crisis, the evolution of the Greek crisis) and the negative shifts that follow the implementation of unconventional monetary policy measures.

Keywords: CDS spreads; Sovereign bank risk interaction; STCC-GARCH correlation analysis (search for similar items in EconPapers)
JEL-codes: E43 E52 F36 C32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S170349491930074X
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:joecas:v:21:y:2020:i:c:s170349491930074x

DOI: 10.1016/j.jeca.2019.e00135

Access Statistics for this article

The Journal of Economic Asymmetries is currently edited by A.G. Malliaris

More articles in The Journal of Economic Asymmetries from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

 
Page updated 2021-03-28
Handle: RePEc:eee:joecas:v:21:y:2020:i:c:s170349491930074x