Avoiding the fall into the loop : isolating the transmission of bank-to-sovereign distress in the euro area and its drivers / Hannes Böhm, Stefan Eichler
Loading...
Download2.3 MB
Avoiding the fall into the loop
Discovery
1040134467
URN
urn:nbn:de:gbv:3:2-98845
DOI
ISBN
ISSN
Koordinaten
Skalierung
dc.contributor.contributor
Other contributor
Publication history
Halle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, [06. November 2018]
Content
1 Online-Ressource (III, 68 Seiten, 2,3 MB) : Diagramme
Edition
Language
eng
Comment
Abstract
We isolate the direct bank-to-sovereign distress channel within the eurozone's sovereign-bank-loop by exploiting the global, non-eurozone related variation in stock prices. We instrument banking sector stock returns in the eurozone with exposure-weighted stock market returns from non-eurozone countries and take further precautions to remove any eurozone crisis-related variation. We find that the transmission of instrumented bank distress, while economically relevant, is significantly smaller than the corresponding coefficient in the unadjusted OLS framework, confirming concerns on reverse causality and omitted variables in previous studies. Furthermore, we show that the spillover of bank distress is significantly stronger for countries with poorer macroeconomic performances, weaker financial sectors and financial regulation and during times of elevated political uncertainty.
Series
IWH-Diskussionspapiere ; 2018, no. 19 (November 2018) ppn:837399270