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Information flow in times of crisis: The case of the European banking and sovereign sectors

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Dungey, M ORCID: 0000-0003-0074-2314, Hurn, S, Shi, Shuping and Volkov, V ORCID: 0000-0001-9721-9700 2019 , 'Information flow in times of crisis: The case of the European banking and sovereign sectors' , Econometrics, vol. 7, no. 1 , pp. 1-20 , doi: 10.3390/econometrics7010005.

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Abstract

Crises in the banking and sovereign debt sectors give rise to heightened financial fragility.Of particular concern is the development of self-fulfilling feedback loops where crisis conditions inone sector are transmitted to the other sector and back again. We use time-varying tests of Grangercausality to demonstrate how empirical evidence of connectivity between the banking and sovereignsectors can be detected, and provide an application to the Greek, Irish, Italian, Portuguese andSpanish (GIIPS) countries and Germany over the period 2007 to 2016. While the results provideevidence of domestic feedback loops, the most important finding is that financial fragility is aninternational problem and cannot be dealt with purely on a country-by-country basis.

Item Type: Article
Authors/Creators:Dungey, M and Hurn, S and Shi, Shuping and Volkov, V
Keywords: financial crises, diabolical loop, banking, sovereign debt
Journal or Publication Title: Econometrics
Publisher: M D P I AG
ISSN: 2225-1146
DOI / ID Number: 10.3390/econometrics7010005
Copyright Information:

Copyright 2019 The Authors. Licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) https://creativecommons.org/licenses/by/4.0/

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