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An investigation into feedback and spatial relationships between banks’ share prices and sovereign bond spreads during the euro crisis

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posted 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.

History

Author affiliation

School of Business, University of Leicester

Version

  • AM (Accepted Manuscript)

Published in

Journal of Financial Stability

Volume

63

Publisher

Elsevier BV

issn

1572-3089

Copyright date

2022

Available date

2024-02-10

Language

en

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