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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractSince the onset of the eurozone sovereign debt crisis, credit risk spreads in Europe have diverged. Despite this divergence, credit risk comoves strongly within certain country groups such as the eurozone periphery. We seek to answer what the determinants of the observed pattern of credit risk co-movements are and whether and during which periods sovereign debt markets have been subject to contagion.We proceed in three steps. First, we apply dynamic conditional correlations from a multivariate GARCH model to sovereign CDS spreads of 17 countries over the period 2008 to 2012. Second, we separate periods of simple interdependence fromcontagion. Third, we analyze the determinants behind credit risk co-movements and the role of contagion using regression analysis. Our results reveal a high degree of co-movements in sovereign credit risk, especially for eurozone countries during the sovereign debt crisis. We find strong evidence for both fundamentals and nonfundamentals based contagion. Similarities in economic fundamentals, cross-country linkages in banking and common market sentiment play a significant role.Keywords: Sovereign debt crisis, financial contagion, banking market integration JEL Classification: F30, F65, G01, G15 * We are grateful to Claudia Buch and Elena Carletti for continuous advice and encouragement. Furthermore, we would like to thank Mascia Bedendo, Martin Biewen, Elena Dumitrescu, Carlo Favero, Peter Hansen, Massimiliano Marcellino, Giovanni Piersanti, Esteban Prieto and Saverio Simonelli for many helpful comments as well as the Bank for International Settlements for kindly providing data. The paper has also benefited from comments by seminar participants at the This divergence can be explained by worsened fiscal positions following government interventions in the banking sector during the financial crisis as well as fiscal stimulus packages. At the same time, a high degree of financial integration in eurozone countries due to cross-border activities of banks and the existence of a common currency gave rise to interdependencies. In how far these interdependencies translate into volatile market reactions across countries and cause co-movements in sovereign credit risk is, however, hardly understood.Our objective is to take a closer look at the pattern of sovereign credit risk across European countries. To do so, we ask the following questions: First, does sovereign credit risk comove across ...

The Swiss National Bank abolished the exchange rate floor versus the Euro in January 2015. Using a synthetic matching framework, we analyze the impact of this unexpected (and therefore exogenous) policy change on the stock market. The results reveal a significant level shift (decline) in asset prices following the discontinuation of the minimum exchange rate. As a novel finding in the literature, we document that the exchange-rate elasticity of Swiss asset prices is around −0.75. Differentiating between sectors of the Swiss economy, we find that the industrial, financial and consumer goods sectors are most strongly affected by the abolition of the minimum exchange rate.

The responsibility for discussion papers lies solely with the individual authors. The views expressed herein do not necessarily represent those of IWH. The papers represent preliminary work and are circulated to encourage discussion with the authors. Citation of the discussion papers should account for their provisional character; a revised version may be available directly from the authors.Comments and suggestions on the methods and results presented are welcome.IWH Discussion Papers are indexed in RePEc-EconPapers and in ECONIS.

This article discusses the role of macroprudential policy in a monetary union. It focuses on three main points. First, macroprudential policy has the objective of mitigating financial stability risks by preventing the build-up of vulnerabilities and increasing resilience. Second, many vulnerabilities reflect country-specific preferences and interact with national institutions. Monitoring and addressing financial stability risks at the national level are thus important. This holds particularly in a monetary union with economies that are highly integrated financially, but heterogeneous along important dimensions that can significantly affect financial stability risks. Third, cross-border externalities and spillovers call for the coordination of national macroprudential policies at the supranational level. This includes mechanisms to account for a potential inaction bias. Methodologically, the article draws on existing literature adding new empirical evidence on financial integration and adjustment to spillovers in the euro area.