Working Papers on International Economics and Finance
Simon Sosvilla-Rivero () and
Victor Echevarria-Icaza ()
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Victor Echevarria-Icaza: Universidad Complutense de Madrid Departamento de Fundamentos del AnÃ¡lisis EconÃ³mico II (EconomÃa 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 YÄ±lmaz (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 countriesÂ´ contribution to stability was particularly significant since DraghiÂ´s `whatever it takesÂ´ 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.
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Persistent link: https://EconPapers.repec.org/RePEc:aee:wpaper:1601
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