TY - JOUR
T1 - Financial sector bailouts, sovereign bailouts, and the transfer of credit risk
AU - Greenwood-Nimmo, Matthew
AU - Huang, Jingong
AU - Nguyenc, Viet Hoang
PY - 2019
Y1 - 2019
N2 - 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.
AB - 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.
U2 - 10.1016/j.finmar.2018.11.001
DO - 10.1016/j.finmar.2018.11.001
M3 - Article
VL - 42
SP - 121
EP - 142
JO - Journal of Financial Markets
JF - Journal of Financial Markets
SN - 1386-4181
ER -