Please use this identifier to cite or link to this item: http://hdl.handle.net/2381/39313
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: 1-May-2017
Publisher: Elsevier, 2017 (in press)
Citation: Journal of International Money and Finance: theoretical and empirical research in international economics and finance, 2017
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.
ISSN: 0261-5606
eISSN: 1873-0639
Links: https://www.journals.elsevier.com/journal-of-international-money-and-finance/
http://hdl.handle.net/2381/39313
Embargo on file until: 1-Jan-10000
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © the authors, 2017. This article is distributed under the terms of the Creative Commons Attribution-Non Commercial-No Derivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/ ), which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.
Description: The file associated with this record is embargoed until 18 months after the date of publication. The final published version may be available through the links above.
Appears in Collections:Published Articles, Dept. of Economics

Files in This Item:
File Description SizeFormat 
Self fulfilling dynamics.pdfPost-review (final submitted author manuscript)932.35 kBAdobe PDFView/Open


Items in LRA are protected by copyright, with all rights reserved, unless otherwise indicated.