Financial sector bailouts, sovereign bailouts, and the transfer of credit risk

Matthew Greenwood-Nimmo; Jingong Huang; Viet Hoang Nguyen

doi:10.1016/j.finmar.2018.11.001

Financial sector bailouts, sovereign bailouts, and the transfer of credit risk

Matthew Greenwood-Nimmo^*
, Jingong Huang
, Viet Hoang Nguyen

^*Corresponding author for this work

Research output: Journal Publication › Article › peer-review

26 Citations (Scopus)

Abstract

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.

Original language	English
Pages (from-to)	121-142
Number of pages	22
Journal	Journal of Financial Markets
Volume	42
DOIs	https://doi.org/10.1016/j.finmar.2018.11.001
Publication status	Published - Jan 2019

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities

Free Keywords

Credit risk transmission
Debt crisis
Financial crisis
Financial–sovereign linkages
Network modeling

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.finmar.2018.11.001

Cite this

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title = "Financial sector bailouts, sovereign bailouts, and the transfer of credit risk",

abstract = "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.",

keywords = "Credit risk transmission, Debt crisis, Financial crisis, Financial–sovereign linkages, Network modeling",

author = "Matthew Greenwood-Nimmo and Jingong Huang and Nguyen, \{Viet Hoang\}",

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year = "2019",

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doi = "10.1016/j.finmar.2018.11.001",

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AU - Greenwood-Nimmo, Matthew

AU - Huang, Jingong

AU - Nguyen, Viet Hoang

PY - 2019/1

Y1 - 2019/1

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.

KW - Credit risk transmission

KW - Debt crisis

KW - Financial crisis

KW - Financial–sovereign linkages

KW - Network modeling

UR - https://www.scopus.com/pages/publications/85058613508

U2 - 10.1016/j.finmar.2018.11.001

DO - 10.1016/j.finmar.2018.11.001

M3 - Article

AN - SCOPUS:85058613508

SN - 1386-4181

VL - 42

SP - 121

EP - 142

JO - Journal of Financial Markets

JF - Journal of Financial Markets

ER -

Financial sector bailouts, sovereign bailouts, and the transfer of credit risk

Abstract

UN SDGs

Free Keywords

ASJC Scopus subject areas

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