Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/223020 
Year of Publication: 
2019
Citation: 
[Journal:] Review of Finance [ISSN:] 1572-3097 [Volume:] 23 [Issue:] 4 [Publisher:] Oxford University Press [Place:] Oxford [Year:] 2019 [Pages:] 745-775
Publisher: 
Oxford University Press, Oxford
Abstract: 
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.
Subjects: 
credit risk
banks
sovereigns
monetary policy
bank bailout
heteroskedasticity
spillovers
JEL: 
E52
G10
E60
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)

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