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Country Risk on the Bank Borrowing Cost Dispersion Within the Euro Area during the Financial and Debt Crises

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  • George Michalopoulos
  • Konstantinos Tsermenidis

Abstract

The purpose of this study is to evaluate the impact of the country risk factors on the dispersion of the cost of bank borrowing within the euro area, during the period of the global financial and Eurozone debt crises. The main aim is to empirically evaluate the degree to which the cost of borrowing differentials of euro area countries can be explained by changing dispersion in country risk (measured by government bond spreads). The results using rolling estimations suggest that the impacts of bond yield spreads are not such a significant determinant of the observed dispersion of the cost of borrowing, a dispersion that has been worsen after the outbreak of the global financial crisis and the subsequent euro area debt crisis. Even in the cases where a significant association is found for some countries, it seems that it is weakening as we move further away from the beginning of the turbulent periods.

Suggested Citation

  • George Michalopoulos & Konstantinos Tsermenidis, 2018. "Country Risk on the Bank Borrowing Cost Dispersion Within the Euro Area during the Financial and Debt Crises," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 76-92.
    • Handle: RePEc:ers:ijebaa:v:vi:y:2018:i:4:p:76-92
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    3. Antonios Adamopoulos, 2020. "Financial Development and Economic Growth: An Empirical Investigation of three European Union Member - Countries," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 10(1), pages 3-24.

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    More about this item

    Keywords

    Country risk; cost dispersion; financial and debt crisis.;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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