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/11540/8021Metadata
Show full item recordRelated items
-
What might US Withdrawal from the World Trade Organization mean for New Zealand? Stress testing the New Zealand economy for extreme US tariff hikes
Welvaert, Mieke (New Zealand Institute of Economic Research, 2020-08-15)New Zealand remains a small player whose outcomes mostly depend on what others do, rather than on what we do ourselves. New Zealand’s main indicators lift when trading partners impose their own tariffs on selective US products. However, this is likely because of trade diversion – trading partners trading less with the US and more with one another (New Zealand is included in this group). Furthermore, ...New Zealand remains a small player whose outcomes mostly depend on what others do, rather than on what we do ourselves. New Zealand’s main indicators lift when trading partners impose their own tariffs on selective US products. However, this is likely ... -
Changes in Determinants of Financial Stress in Emerging Market Economies after the GFC
Jeong, Young Sik; Yang, Da Young; Kang, Eunjung; Ko, Deokki (Korea Institute for International Economic Policy, 2020-08-13)Since the global financial crisis (GFC) in 2008, various forms of financial instability have repeatedly emerged when considering the European debt crisis, US interest rate hikes, plunge in commodity prices, and concerns about a hard landing in the Chinese economy. Recently, the international financial market has been unstable due to the COVID-19 pandemic and the intensifying US-China conflict. During ...Since the global financial crisis (GFC) in 2008, various forms of financial instability have repeatedly emerged when considering the European debt crisis, US interest rate hikes, plunge in commodity prices, and concerns about a hard landing in the ... -
Determinants of Financial Stress in Emerging Market Economies
Park, Cyn-Young; Rogelio V. Mercado, Jr. (Asian Development Bank, 2013-07-15)The global financial crisis of 2008–2009 illustrates how financial turmoil in advanced economies could trigger severe financial stress in emerging markets. Previous studies dealing with financial crises and contagion show the linkages through which financial stress are transmitted from advanced to emerging markets. This paper extends the existing literature on the use of financial stress index (FSI) ...The global financial crisis of 2008–2009 illustrates how financial turmoil in advanced economies could trigger severe financial stress in emerging markets. Previous studies dealing with financial crises and contagion show the linkages through which ...