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Credit Spread Interdependencies of European States and Banks during the Financial Crisis (Alter A., Schüler Y.S.)

Bank Products and Diversification Financial Crises

Abstract This study analyzes the relationship between the default risk of several European states and financial institutions during the period June 2007 -May 2010. It investigates how bank bailout schemes affected this linkage. We consider sovereign credit default swap (CDS) spreads from seven Eurozone member states (France, Germany, Italy, Ireland, Netherlands, Portugal, and Spain) together with a selection of bank CDS series from these states. Our main finding suggest that in the period preceding government rescue schemes the contagion from bank credit spreads disperses into the sovereign CDS market. After government interventions, due to changes in the composition of both banks’ and sovereign balance sheets, our results underline the augmented importance of the government CDS spreads in the price discovery mechanism of banks’ CDS series. Furthermore, a financial sector shock affects more strongly the sovereign CDS spreads in the short-run, however the impact becomes insignificant at a long horizon. Our analysis emphasizes heterogeneous outcomes across countries but homogeneous across domestic banks.
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Libref/ Alter A., Schüler Y.S. (2011) "Credit Spread Interdependencies of European States and Banks during the Financial Crisis", University of Konstanz Department of Economics, Working Paper 2011-34
© Программирование — Александр Красильников, 2008
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