Bank Exposures and Sovereign Stress Transmission

Marco Pagano, Saverio Simonelli and Carlo Altavilla

No 11269, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using novel monthly data for 226 euro-area banks from 2007 to 2015, we investigate the causes and effects of banks' sovereign exposures during and after the euro crisis. First, in the vulnerable countries, the publicly owned, recently bailed out and less strongly capitalized banks reacted to sovereign stress by increasing their domestic sovereign holdings more than other banks, suggesting that their choices were affected both by moral suasion and by yield-seeking. Second, their exposures significantly amplified the transmission of risk from the sovereign and its impact on lending. And this amplification of the impact on lending cannot be ascribed to spurious correlation or reverse causality.

Keywords: Sovereign exposures; Sovereign risk; Credit risk; Diabolic loop; lending; Euro debt crisis (search for similar items in EconPapers)
JEL-codes: E44 F3 G01 G21 H63 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53)

Downloads: (external link)
https://cepr.org/publications/DP11269 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Bank Exposures and Sovereign Stress Transmission (2017)
Working Paper: Bank Exposures and Sovereign Stress Transmission (2017)
Working Paper: Bank exposures and sovereign stress transmission (2016)
Working Paper: Bank Exposures and Sovereign Stress Transmission (2016)
Working Paper: Bank exposures and sovereign stress transmission (2016)
Working Paper: Bank exposures and sovereign stress transmission (2016)
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:cpr:ceprdp:11269

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11269

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().