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Inside European Financial Instability: Main Causes and Possible Solutions
Author(s) -
Bonamini Giulia,
D'Apice Vincenzo,
Forte Antonio
Publication year - 2015
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/ecno.12026
Subject(s) - granger causality , economics , sovereign debt , financial crisis , fragility , order (exchange) , financial stability , european debt crisis , causality (physics) , debt , sovereignty , financial system , monetary economics , financial fragility , international economics , macroeconomics , finance , econometrics , european union , european integration , political science , chemistry , physics , quantum mechanics , politics , law
Since 2010, some European countries have been going through a difficult period of economic and financial fragility. The aim of this paper is to review the main causes of European financial instability. Since the analysis reflects an important interconnection between public debt and banking stability, we empirically investigate this interaction through a Granger causality analysis. Testing the possible existence of Granger causal relationships between sovereign debt and banking stability allows us to identify countries in which a sovereign crisis caused a banking crisis and vice versa. Finally, we describe possible solutions in order to exit from the crisis and the economic policy implications .