CEU Electronic Theses and Dissertations, 2022
| Author | Farkas, Marcell |
|---|---|
| Title | Sovereign-Bank Nexus in the Eurozone during the COVID-19 Crisis: Empirical Analysis and Policy Implications |
| Summary | In this thesis, I investigate the connection between bank and sovereign credit risk during the COVID-19 crisis. In the first part of the thesis, I provide an overview of the European sovereign debt crisis and the subsequent policy responses from the perspective of the sovereign-bank nexus and contrast it with the COVID-19 crisis. Then, I estimate the strength of the sovereign-bank nexus using panel regressions on bank and sovereign CDS spreads, employing a dataset of 24 banks and 11 Eurozone countries between 2018 and 2022 February. I investigate the hypotheses that there was a significant connection between bank and sovereign credit risk preceding and during the COVID-19 crisis, and that the connection between the two actors has declined over the course of the pandemic. Consistent with the hypotheses, I find that the nexus between sovereigns and banks has declined in the two-year period after February 2020, when the first cases of the COVID-19 appeared in Europe. The relationship was, however, still significant on average in the 11 Eurozone countries in the sample during the investigation period. Moreover, results arising from country subsamples suggest that the nexus was present primarily in the peripheric (rather than the core) countries of the Eurozone. |
| Supervisor | Schindele, Ibolya |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2022/farkas_marcell.pdf |
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