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oai:docta.ucm.es:20.500.14352/416302025-07-08T00:03:07Zcom_20.500.14352_14col_20.500.14352_17

Sovereigns and banks in the euro area: A tale of two crises Gómez-Puig, Marta Singh, Manish Sosvilla Rivero, Simón Javier C22 E44 G01 G13 G21 Sovereign debt crisis Banking crisis Granger-causality Time-varying approach Distance-to-default Euro area Bancos y cajas Crisis económicas Econometría (Economía) Economía internacional Economía pública Finanzas Integración económica 5307.06 Fluctuaciones Económicas 5302 Econometría 5310 Economía Internacional 5309.02 Integración Económica 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. Depto. de Análisis Económico y Economía Cuantitativa Fac. de Ciencias Económicas y Empresariales TRUE unpub 2023-06-19T23:56:05Z 2023-06-19T23:56:05Z 2015 technical report https://hdl.handle.net/20.500.14352/41630 1696-6376 eng Working Papers on International Economics and Finance ECO2011-23189 ECO2013-48326 open access application/pdf Asociación Española de Economía y Finanzas Internacionales