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.
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Keywords
Financial crisis, Debt crisis, Financial–sovereign linkages, Credit risk transmission, Network modeling
Citation
Collections
Source
Journal of Financial Markets
Type
Journal article
Book Title
Entity type
Access Statement
License Rights
Restricted until
2099-12-31
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