Flavin, Thomas and Dongey, M. and Sheenan, Lisa (2020) Banks and Sovereigns: Did adversity bring them closer? Working Paper N307-20. Working Paper. Economics, Finance and Accounting Department, Maynooth University.

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Abstract

We analyse the stability of the cross-market shock transmission mechanism between banks and sovereign bonds during the Eurozone sovereign debt crisis for crisis-hit periphery countries and Germany. We also examine the shock propagation of banking shocks and sovereign bond shocks between domestic and external markets. Using a Markov-switching framework, we find strong evidence of bilateral contagion between banks and sovereign bonds and also between domestic and external banking sectors. Sovereign bond markets are different. An external shock only produces contagious effects in Greece, who were largely dependent on external aid. For all the others, external shocks lead to decoupling as investors became increasingly discerning in their perception of the debt instruments issued by different Eurozone states.

Item Type:	Monograph (Working Paper)
Keywords:	Sovereign bonds; Debt crisis; Banking crisis; Eurozone; Markov-switching VAR;
Academic Unit:	Faculty of Social Sciences > School of Business
Item ID:	13574
Depositing User:	Thomas Flavin
Date Deposited:	12 Nov 2020 16:56
Publisher:	Economics, Finance and Accounting Department, Maynooth University
URI:	Organisation
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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