Bank and sovereign debt risk connection

Research, Preprint English OPEN
Darracq Paries, Matthieu; Faia, Ester; Rodriguez-Palenzuela, Diego;
  • Publisher: Frankfurt a. M.: Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
  • Related identifiers: doi: 10.2139/ssrn.2228494
  • Subject: E5 | sovereign risk | E6 | liquidity risk,sovereign risk,capital regulations | liquidity risk | G2 | G3 | capital regulations
    • jel: jel:G2 | jel:E5
      ddc: ddc:330

Euro area data show a positive connection between sovereign and bank risk, which increases with banks' and sovereign long run fragility. We build a macro model with banks subject to incentive problems and liquidity risk (in the form of liquidity based banks' runs) which... View more
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