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Do institutions prevent contagion in financial markets? Evidence from the European debt crisis

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  • Kyriaki Kosmidou
  • Dimitrios Kousenidis
  • Anestis Ladas
  • Christos Negkakis

Abstract

The recent European Sovereign Debt Crisis brought in attention a number of structural problems in the European Union. Part of the effort to correct these problems in the countries that were mostly affected by the crisis were a number of policy responses from the European Union, the European Central Bank, the International Monetary Fund and the Local Governments. In this study, we attempt to assess the success of these responses to constrain the contagion of the crisis from the banking sector to the real economy sectors of the Eurozone countries. Our results show that policy announcements from the EU/ECB/IMF affect the transmission of shocks generated in the banking sector to the market. Moreover, policy responses of the national governments also seem to play a role in the contagion of the crisis.

Suggested Citation

  • Kyriaki Kosmidou & Dimitrios Kousenidis & Anestis Ladas & Christos Negkakis, 2019. "Do institutions prevent contagion in financial markets? Evidence from the European debt crisis," The European Journal of Finance, Taylor & Francis Journals, vol. 25(7), pages 632-646, May.
    • Handle: RePEc:taf:eurjfi:v:25:y:2019:i:7:p:632-646
    DOI: 10.1080/1351847X.2018.1552171
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    Cited by:

    1. Corbet, Shaen & Cumming, Douglas J. & Hou, Yang (Greg) & Hu, Yang & Oxley, Les, 2022. "Have crisis-induced banking supports influenced European bank performance, resilience and price discovery?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    2. Xiurong Chen & Aimin Hao & Yali Li, 2020. "The impact of financial contagion on real economy-An empirical research based on combination of complex network technology and spatial econometrics model," PLOS ONE, Public Library of Science, vol. 15(3), pages 1-20, March.
    3. Rajan Sruthi & Santhakumar Shijin, 2020. "Investigating liquidity constraints as a channel of contagion: a regime switching approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-21, December.

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