Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/191549
Authors: 
Buse, Rebekka
Schienle, Melanie
Urban, Jörg
Year of Publication: 
2019
Series/Report no.: 
KIT Working Paper Series in Economics 125
Abstract: 
We study the impact of changes in regulations and policy interventions on systemic risk among European sovereigns measured as volatility spillovers in respective credit risk markets. Our unique intraday CDS dataset allows for precise measurement of the effectiveness of these events in a network setting. In particular, it allows discerning interventions which entail significant changes in network cross-effects with appropriate bootstrap confidence intervals. We show that it was mainly regulatory changes with the ban of trading naked sovereign CDS in 2012 as well as the new ISDA regulations in 2014 which were most effective in reducing systemic risk. In comparison, we find that the effect of policy interventions was minor and generally not sustainable. In particular, they only had a significant impact when implemented for the first time and when targeting more than one country. For the volatility spillover channels, we generally find balanced networks with no fragmentation over time.
Subjects: 
Financial Crises
Policy and Regulation
Financial Stability and Systemic Risk in the Eurozone
High-Frequency CDS
Bootstrap Spillover-Measures
JEL: 
G20
G01
G17
C32
C55
G28
Document Type: 
Working Paper
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