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

Matthew Greenwood-Nimmo, Jingong Huang, Viet Hoang Nguyen

Research output: Journal PublicationArticlepeer-review

9 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 languageEnglish
Pages (from-to)121-142
Number of pages22
JournalJournal of Financial Markets
Volume42
DOIs
Publication statusPublished - Jan 2019

Keywords

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

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Financial sector bailouts, sovereign bailouts, and the transfer of credit risk'. Together they form a unique fingerprint.

Cite this