Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/247505 
Year of Publication: 
2019
Citation: 
[Journal:] Econometrics [ISSN:] 2225-1146 [Volume:] 7 [Issue:] 1 [Publisher:] MDPI [Place:] Basel [Year:] 2019 [Pages:] 1-20
Publisher: 
MDPI, Basel
Abstract: 
Crises in the banking and sovereign debt sectors give rise to heightened financial fragility. Of particular concern is the development of self-fulfilling feedback loops where crisis conditions in one sector are transmitted to the other sector and back again. We use time-varying tests of Granger causality to demonstrate how empirical evidence of connectivity between the banking and sovereign sectors can be detected, and provide an application to the Greek, Irish, Italian, Portuguese and Spanish (GIIPS) countries and Germany over the period 2007 to 2016. While the results provide evidence of domestic feedback loops, the most important finding is that financial fragility is an international problem and cannot be dealt with purely on a country-by-country basis.
Subjects: 
financial crises
diabolical loop
banking
sovereign debt
JEL: 
C22
G01
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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