Connectedness of stress in EMU bank and sovereign CDS: the role policy measures 2008-2014
Simon Sosvilla-Rivero () and
Victor Echevarria-Icaza ()
Additional contact information
Victor Echevarria-Icaza: Universidad Complutense de Madrid Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa)
No 16-01, Working Papers from Asociación Española de Economía y Finanzas Internacionales
This paper measures the connectedness in European Economic and Monetary Union (EMU) sovereign and bank CDS between April 2008 and December 2014, in order to understand the transmission of stress during the euro crisis. To this end, we perform a connectedness analysis using the framework proposed by Diebold and Yilmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each country and bank. Finally, we interpret the policy conclusions that stem from the results. We find that core countries´ contribution to stability was particularly significant since Draghi´s `whatever it takes´ speech. Bank risk played a role in enhancing sovereign risk. However, the systemic impact of banks changes rapidly once a crisis strikes, rendering the ex-ante determination of which banks are systemic and which banks will have a higher impact on the sovereign difficult. Acknowledgements: The authors are grateful to Fernando Fernandez-Rodriguez for his assistance with the data.
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aee:wpaper:1601
Access Statistics for this paper
More papers in Working Papers from Asociación Española de Economía y Finanzas Internacionales Contact information at EDIRC.
Bibliographic data for series maintained by Luis Miguel del Corral Cuervo ().