Monetary Policy, Bank Bailouts and the Sovereign-Bank Risk Nexus in the Euro Area

Artikel

The paper analyses the empirical relationship between bank credit risk and sovereign credit risk in the euro area, using a system of simultaneous equations identified through heteroskedasticity. We first confirm a two-way causality between both risks, which amplifies initial credit risk shocks. We also document significant credit risk spillovers between sovereigns and banks in the periphery and the core countries. The paper then focuses on the impact of ECB non-standard monetary policy and bank bailout policies. We show that bailouts have reduced both risks. Monetary policy lowered in most but not all cases bank and sovereign risk.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Review of Finance ; ISSN: 1572-3097 ; Volume: 23 ; Year: 2019 ; Issue: 4 ; Pages: 745-775 ; Oxford: Oxford University Press

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; General Financial Markets: General (includes Measurement and Data) ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
• Subject: credit risk ; banks ; sovereigns ; monetary policy ; bank bailout ; heteroskedasticity ; spillovers

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fratzscher, Marcel ; Rieth, Malte
• Event: Veröffentlichung
• (who): Oxford University Press ; ZBW – Leibniz Information Centre for Economics
• (where): Oxford
• (when): 2019

Further information

• DOI: doi:10.1093/rof/rfy024
• Handle: http://hdl.handle.net/10419/223020
• Last update: 10.03.2025, 11:43 AM CET