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Contagion and interdependence in Eurozone bank and sovereign credit markets
Author(s) -
Bratis Theodoros,
Laopodis Nikiforos T.,
Kouretas Georgios P.
Publication year - 2018
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1642
Subject(s) - economics , credit default swap , credit risk , monetary economics , sovereignty , financial stability , swap (finance) , financial system , international economics , politics , finance , political science , law
This paper focuses on the nature of co‐movement of credit risk measured by credit default swap spreads in both banking and sovereign sectors within EMU. We test for contagion and/or interdependence across countries and across banks under the prism of the Eurozone's Financial Stability Pact. Our main results on financial stability show mostly interdependence within EMU, as expected. In contrast, contagion has only been found in some cases, the determinants of which are attributed to political risk and market risk factors.