Banking interdependence and sovereign risk transmission: Evidence from the United States, Europe and the United Kingdom

Authors

  • Christian Jorge Carreiro Doctorando en Economía y Empresa, Universidad de Santiago de Compostela

DOI:

https://doi.org/10.32826/reyf.v2i5.370

Keywords:

Connectedness, Sovereign Debt, Spillovers, Volatility

Abstract

The objective of this work is to analyze the interdependence between the European, North American and English banking systems for the 2019-2024 period from a financial risk transmission perspective and the analysis of the transmission of sovereign risk from each area to its own banking system. Two methodological approaches have been used to accomplish these objectives. The first one is based on the estimation of VAR-BEKK-X and VAR-DCC-X models, and the well-known connectedness approach proposed by Diebold and Yilmaz. The results shed light on the fact that the European and English banking systems are highly interdependent, as shown by their high correlation, while the North American banking system and the former ones have a lower and more variable correlation. Ultimately, spillover effects were found among the three banking systems, although it was not possible to determine their direction, and, albeit weaker, spillovers also show up between sovereigns and banking.

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Published

2024-12-13

Issue

Vol. 2 No. 5 (2024): Revista de Economía y Finanzas (May - August 2024)

Section

Articles

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