RT Report
T1 Sovereigns and banks in the euro area: A tale of two crises
A1 Gómez-Puig, Marta
A1 Singh, Manish
A1 Sosvilla Rivero, Simón Javier
AB This study attempts to identify and trace inter-linkages between sovereign and banking risk in the euro area. To this end, we use an indicator of banking risk in each country based on the Contingent Claim Analysis literature, and 10-year government yield spreads over Germany as a measure of sovereign risk. We apply a dynamic approach to testing for Granger causality between the two measures of risk in 10 euro area countries, allowing us to check for contagion in the form of a significant and abrupt increase in short-run causal linkages. The empirical results indicate that episodes of contagion vary considerably in both directions over time and within the different EMU countries. Significantly, we find that causal linkages tend to strengthen particularly at the time of major financial crises. The empirical evidence suggests the presence of contagion, mainly from banks to sovereigns.
PB Asociación Española de Economía y Finanzas Internacionales
SN 1696-6376
YR 2015
FD 2015
LK https://hdl.handle.net/20.500.14352/41630
UL https://hdl.handle.net/20.500.14352/41630
LA eng
NO Government of Spain
DS Docta Complutense
RD 7 abr 2025