Please use this identifier to cite or link to this item: http://hdl.handle.net/2381/38669
Title: Self-fulfilling dynamics: The interactions of sovereign spreads, sovereign ratings and bank ratings during the euro financial crisis
Authors: Gibson, Heather D.
Hall, Stephen G.
Tavlas, George S.
First Published: 22-Feb-2017
Publisher: Elsevier
Citation: Journal of International Money and Finance, 2017, 73 A, pp. 118–133
Abstract: During the euro-area financial crisis, interactions among sovereign spreads, sovereign credit ratings, and bank credit ratings appeared to have been characterized by selfgenerating feedback loops. To investigate the existence of feedback loops, we consider a panel of five euro-area stressed countries within a three-equation simultaneous system in which sovereign spreads, sovereign ratings and bank ratings are endogenous. We estimate the system using two approaches. First we apply GMM estimation, which allows us to calculate persistence and multiplier effects. Second, we apply a new, system time-varying-parameter technique that provides bias-free estimates. Our results show that sovereign ratings, sovereign spreads, and bank ratings strongly interacted with each other during the euro crisis, confirming strong doom-loop effects.
DOI Link: 10.1016/j.jimonfin.2017.02.013
ISSN: 0261-5606
eISSN: 1873-0639
Links: http://www.sciencedirect.com/science/article/pii/S0261560617300335
http://hdl.handle.net/2381/38669
Embargo on file until: 22-Aug-2018
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2017, Elsevier. Deposited with reference to the publisher’s open access archiving policy.
Description: JEL Classification: E63, G12
The file associated with this record is under embargo until 18 months after publication, in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.
Appears in Collections:Published Articles, Dept. of Economics

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