Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142155
Authors: 
Covi, Giovanni
Eydam, Ulrich
Year of Publication: 
2016
Series/Report no.: 
Kiel Advanced Studies Working Papers 468
Abstract: 
In this paper we examine the relationship between the default risk of banks and sovereigns, i.e. the 'doom-loop'. Specifically we try to assess the effectiveness of the implementation of the new recovery and resolution framework. We use a panel with daily data on European banks and sovereigns ranging from 2008 to 2016. We find that there was a pronounced feedback loop between banks and sovereigns from 2008 to 2014. However, this feedback loop seems to have disappeared after the implementation of the new regulatory framework. This finding is robust across several specifications.
Subjects: 
Financial Stability
Sovereign Bailout
Doom Loop
Bank Recovery and Resolution Directive
European Banking Union
JEL: 
E58
G01
G18
L51
Document Type: 
Working Paper

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