The multi-country transmission of sovereign and banking risk: a spatial vector autoregressive approach

Zhu, B. (2018) The multi-country transmission of sovereign and banking risk: a spatial vector autoregressive approach. Spatial Economic Analysis, 13 (4). pp. 422-441. ISSN 1742-1780 doi: 10.1080/17421772.2018.1473890

Abstract/Summary

This paper develops a spatial vector autoregressive (SpVAR) model to investigate the transmission of sovereign, banking, and corporate default risks among eleven Eurozone countries for the January 2008–December 2013 period. The results show that a significant proportion of default risk variation is explained by foreign shocks. However, the cross-border sovereign–bank nexus is statistically significant, but economically moderate. Among the three sectors, shocks to the banking sector play the most critical role. On average, for the eleven countries, a foreign banking shock can explain 7%, 23%, and 18% of the forecast error variance of changes in sovereign, banking, and corporate credit default swap (CDS) spreads, respectively.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/76998
Identification Number/DOI	10.1080/17421772.2018.1473890
Refereed	Yes
Divisions	Henley Business School > Real Estate and Planning
Publisher	Taylor & Francis
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