Euro Area Sovereign Risk During the Crisis
Title | Euro Area Sovereign Risk During the Crisis PDF eBook |
Author | Ms.Silvia Sgherri |
Publisher | International Monetary Fund |
Pages | 25 |
Release | 2009-10-01 |
Genre | Business & Economics |
ISBN | 1451873697 |
While the use of public resources is critical to cushion the impact of the financial crisis on the euro-area economy, it is key that the entailed fiscal costs not be seen by markets as undermining fiscal sustainability. From this perspective, to what extent do movements in euro area sovereign spreads reflect country-specific solvency concerns? In line with previous studies, the paper suggests that euro area sovereign risk premium differentials tend to comove over time and are mainly driven by a common time-varying factor, mimicking global risk repricing. Since October 2008, however, there is evidence that markets have become progressively more concerned about the potential fiscal implications of national financial sectors' frailty and future debt dynamics. The liquidity of sovereign bond markets still seems to play a significant (albeit fairly limited) role in explaining changes in euro area spreads.
Sovereign Risk and Belief-Driven Fluctuations in the Euro Area
Title | Sovereign Risk and Belief-Driven Fluctuations in the Euro Area PDF eBook |
Author | Giancarlo Corsetti |
Publisher | International Monetary Fund |
Pages | 49 |
Release | 2013-11-06 |
Genre | Business & Economics |
ISBN | 1475513445 |
Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this “sovereign risk channel.” The model is calibrated to the euro area as of mid-2012. We show that a combination of sovereign risk in one region and strongly procyclical fiscal policy at the aggregate level exacerbates the risk of belief-driven deflationary downturns. The model provides an argument in favor of coordinated, asymmetric fiscal stances as a way to prevent selffulfilling debt crises.
The European Sovereign Debt Crisis
Title | The European Sovereign Debt Crisis PDF eBook |
Author | Phoebus L. Athanassiou |
Publisher | Routledge |
Pages | 165 |
Release | 2021-08-23 |
Genre | Law |
ISBN | 1000423093 |
The European Sovereign Debt Crisis: Breaking the Vicious Circle between Sovereigns and Banks explains why the euro area’s progress towards reining in the risks arising from the well-documented bi-directional financial contagion transmission mechanism that links sovereigns to commercial banks has been more prominent compared to the channel of contagion moving from banks to sovereigns. Providing an analysis of the legal and regulatory measures that Europe and the euro area have taken to mitigate the exposure of sovereigns to financial crises generated by commercial banks, this book draws attention to areas where improvements to the arsenal of tools hitherto introduced are either desirable or necessary. Chapters further explain – with recourse to economic and legal arguments – why the channel of contagion moving from sovereigns to commercial banks has proven harder to close, and explores ways in which progress could be made in the direction of closing it so as to avert the risk of future banking sector crises. This work provides essential reading for students, researchers and practitioners with an interest in sovereign debt crises and the euro-area banking system.
Managing the Sovereign-Bank Nexus
Title | Managing the Sovereign-Bank Nexus PDF eBook |
Author | Mr.Giovanni Dell'Ariccia |
Publisher | International Monetary Fund |
Pages | 54 |
Release | 2018-09-07 |
Genre | Business & Economics |
ISBN | 1484359623 |
This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
IMF Working Papers
Title | IMF Working Papers PDF eBook |
Author | Silvia Sgherri |
Publisher | |
Pages | |
Release | 2009 |
Genre | Electronic books |
ISBN |
Intraday Dynamics of Euro Area Sovereign Credit Risk Contagion
Title | Intraday Dynamics of Euro Area Sovereign Credit Risk Contagion PDF eBook |
Author | Luboš Komárek |
Publisher | |
Pages | |
Release | 2016 |
Genre | |
ISBN |
Banks, Government Bonds, and Default
Title | Banks, Government Bonds, and Default PDF eBook |
Author | Nicola Gennaioli |
Publisher | International Monetary Fund |
Pages | 53 |
Release | 2014-07-08 |
Genre | Business & Economics |
ISBN | 1498391990 |
We analyze holdings of public bonds by over 20,000 banks in 191 countries, and the role of these bonds in 20 sovereign defaults over 1998-2012. Banks hold many public bonds (on average 9% of their assets), particularly in less financially-developed countries. During sovereign defaults, banks increase their exposure to public bonds, especially large banks and when expected bond returns are high. At the bank level, bondholdings correlate negatively with subsequent lending during sovereign defaults. This correlation is mostly due to bonds acquired in pre-default years. These findings shed light on alternative theories of the sovereign default-banking crisis nexus.