Financial sector bailouts, sovereign bailouts, and the transfer of credit risk

Date

2019

Authors

Greenwood-Nimmo, Matthew
Huang, Jingong
Nguyenc, Viet Hoang

Journal Title

Journal ISSN

Volume Title

Publisher

Elsevier

Abstract

We develop an empirical network model to study credit risk spillovers among a group of eighteen sovereigns and their financial sectors from 2006 to 2015. Initially a net source of credit risk, the financial sector becomes a net recipient after the 2008 financial sector bailouts in many countries. Fiscal fundamentals explain much of the heterogeneity in financial-sovereign spillovers over this period. The subsequent European sovereign bailouts disrupt the feedback between sovereign risk and local financial sector risk. Depending on the initial fiscal position of the target country, sovereign bailouts may also disrupt international credit risk spillovers originating from the target sovereign.

Description

Keywords

Financial crisis, Debt crisis, Financial–sovereign linkages, Credit risk transmission, Network modeling

Citation

Source

Journal of Financial Markets

Type

Journal article

Book Title

Entity type

Access Statement

License Rights

Restricted until

2099-12-31