Dungey, Mardi and Flavin, Thomas and Sheenan, Lisa (2021) Banks and sovereigns: did adversity bring them closer? The European Journal of Finance. pp. 1-26. ISSN 1351-847X

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Abstract

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

Item Type:	Article
Keywords:	Sovereign bonds; debt crisis; banking crisis; Eurozone; Markov-switching VAR;
Academic Unit:	Faculty of Social Sciences > School of Business
Item ID:	17215
Identification Number:	https://doi.org/10.1080/1351847X.2021.1910056
Depositing User:	Thomas Flavin
Date Deposited:	23 May 2023 11:03
Journal or Publication Title:	The European Journal of Finance
Publisher:	Taylor & Francis
Refereed:	Yes
URI:	Publisher
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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