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An investigation into feedback and spatial relationships between banks’ share prices and sovereign bond spreads during the euro crisis
journal contributionposted on 2022-12-19, 09:42 authored by HD Gibson, SG Hall, P Petroulas, GS Tavlas
We examine (1) spillover effects between euro-area sovereigns and banking systems within national jurisdictions and (2) cross-country spillovers among ten countries during the euro-area crisis. We find that cross-country spillovers substantially amplify the doom loops between the sovereign and banking sectors. We also provide a test that supports the hypothesis that cross-country spillovers among southern-euro-area countries were of a different order from the spillovers among northern-euro-area countries. Our results also imply that, if shocks are idiosyncratic, spillover effects may help in reducing the impact for northern countries.
Author affiliationSchool of Business, University of Leicester
- AM (Accepted Manuscript)