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    Sovereign Stress, Banking Stress, and the Monetary Transmission Mechanism in the Euro Area

    Holtemöller, Oliver; Scherer, Jan-Christopher | February 2018
    Abstract
    In this paper, we investigate to what extent sovereign stress and banking stress have contributed to the increase in the level and in the heterogeneity of non-financial firms’ financing costs in the Euro area during the European debt crisis and how both have affected the monetary transmission mechanism. Employing a large firm-level data set containing 2 million observations we are able to identify the effect of government bond yield spreads (sovereign stress) and the share of non-performing loans (banking stress) on firms’ financing costs in a panel model by assuming that idiosyncratic shocks to individual firms are uncorrelated with country-specific variables. We find that the two sources of stress have increased firm's’ financing costs controlling for country and firm-specific factors. Moreover, we estimate both to have significantly impaired the monetary transmission mechanism.
    Citation
    Holtemöller, Oliver; Scherer, Jan-Christopher. 2018. Sovereign Stress, Banking Stress, and the Monetary Transmission Mechanism in the Euro Area. © Asian Development Bank Institute. http://hdl.handle.net/11540/8021.
    Keywords
    Cofinancing
    Development Financing
    Economic Development and Finance
    Finance
    Financial Advisory Services
    Financial Assistance
    Financial Support
    Credit Policy
    Credit Cooperatives
    Industrial Credit
    Commercial credit
    Commerce and Industry
    Intra-Industry Trade
    Large Scale Industry
    Labor
    ADB
    Self Financing
    Aid Financing
    Financial Aid
    Development Banks
    Project Impact
    Export Credit Financing
    Industrialization
    Industrial Economics
    Industrial Development
    Industrial Policy
    Development Banks
    Asset allocation
    Investment management
    Commercial documents
    Credit control
    Credit allocation
    Capital market
    Developing countries
    Market share
    Labor
    Show allCollapse
    Citable URI
    http://hdl.handle.net/11540/8021
    Metadata
    Show full item record
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    adbi-wp811.pdf (496.6Kb)
    Author
    Holtemöller, Oliver
    Scherer, Jan-Christopher
    Theme
    Finance
    Industry

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    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise