The Negative Feedback Loop between Banks and Sovereigns

33 Pages Posted: 4 Apr 2014

Date Written: February 20, 2014

Abstract

More than three years since the outbreak of the sovereign debt crisis in the euro area the banking systems of several countries remain exposed to the vagaries of government bond markets. The paper analyzes the different channels through which sovereign risk affects banking risk (and vice versa), presents some new evidence on bank-sovereign links, and discusses policy options for addressing the related risks.

Keywords: sovereign risk, sovereign debt crisis, global financial crisis, banking sector risk, bank regulation, contagion, credit crunch

JEL Classification: E44, E51, E58, G01, G21, G28, H63

Suggested Citation

Angelini, Paolo and Grande, Giuseppe and Panetta, Fabio, The Negative Feedback Loop between Banks and Sovereigns (February 20, 2014). Bank of Italy Occasional Paper No. 213, Available at SSRN: https://ssrn.com/abstract=2419943 or http://dx.doi.org/10.2139/ssrn.2419943

Paolo Angelini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Giuseppe Grande

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy
+390647922643 (Phone)
+390647923723 (Fax)

Fabio Panetta

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy
+39 06 4792 4143 (Phone)
+39 06 4792 3723 (Fax)

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