Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174552
Authors: 
Saroyan, Susanna
Popoyan, Lilit
Year of Publication: 
2017
Series/Report no.: 
LEM Working Paper Series 2017/02
Abstract: 
This paper investigates interbank market fragmentation that results from the bank-sovereign risk nexus. We focus on the Italian market fragmentation during the post-Lehman and sovereign debt crisis era. By using Italian bank and GIPSI country CDS spread changes, we suggest a new measure of sovereign/bank spillovers, based on partial correlations. Then, we examine the relationship between the sovereign-to-banks contagion risk variable and market fragmentation in rate on the e-MID interbank market data. We find that the bank-sovereign nexus is a signicant source of fragmentation during the most acute phase of the sovereign debt crisis. Our findings suggest that even if the home country/bank ties impact interbank market integration seriously, the risk from other distressed countries is not negligible.
Subjects: 
Money market fragmentation
sovereign risk
sovereign-bank spillover
contagion
bank regulation
JEL: 
E42
E58
G21
G28
Document Type: 
Working Paper

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