Impacts Of The Sovereign Default Crisis On The Czech Financial Sector
In: CNB Financial Stability Report 2011/2012
This article discusses the experience of countries hit by debt crises as well as the channels of contagion of sovereign default risk to the financial system. It focuses primarily on identifying channels of contagion that might represent a relevant threat to the Czech economy and discusses their significance. Although sovereign default risk is currently relatively low for the Czech Republic thanks to its low level of government debt, an escalation of this risk would have significant impacts on the financial system given the comparatively high proportion of government bonds in banks' balance sheets. The article also illustrates the significance of cross-country contagion to sovereign credit premiums. Here, the transmission from the countries hit hardest by the debt crisis has weakened, but the Czech Republic's credit premium is diverging from the most stable countries at a time of market stress. The risk of heightened sensitivity of credit premiums to a country's debt may increase the costs of irresponsible fiscal policy in the future. It is therefore another factor that should be covered by financial stability analysis.
|This chapter was published in: Kamil Janacek & Zlatuse Komarkova & Michal Hlavacek & Lubos Komarek CNB Financial Stability Report 2011/2012, , chapter Thematic Article 3, pages 118-128, 2012.|
|This item is provided by Czech National Bank, Research Department in its series Occasional Publications - Chapters in Edited Volumes with number fsr1112/3.|
|Contact details of provider:|| Postal: |
Phone: 00420 2 2442 1111
Fax: 00420 2 2421 8522
Web page: http://www.cnb.cz/en/research/research_intro/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christian Keller & Peter Kunzel & Marcos Souto, 2007. "Measuring Sovereign Risk in Turkey; An Application of the Contingent Claims Approach," IMF Working Papers 07/233, International Monetary Fund.
- Diebold, Francis X. & Yilmaz, Kamil, 2012.
"Better to give than to receive: Predictive directional measurement of volatility spillovers,"
International Journal of Forecasting,
Elsevier, vol. 28(1), pages 57-66.
- Francis X. Diebold & Kamil Yilmaz, 2010. "Better to Give than to Receive: Predictive Directional Measurement of Volatility Spillovers," Koç University-TUSIAD Economic Research Forum Working Papers 1001, Koc University-TUSIAD Economic Research Forum, revised Mar 2010.
- Fontana, Alessandro & Scheicher, Martin, 2010. "An analysis of euro area sovereign CDS and their relation with government bonds," Working Paper Series 1271, European Central Bank.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
- Ebner, André, 2009. "An empirical analysis on the determinants of CEE government bond spreads," Emerging Markets Review, Elsevier, vol. 10(2), pages 97-121, June.
- Michael Gapen & Dale Gray & Cheng Hoon Lim & Yingbin Xiao, 2008. "Measuring and Analyzing Sovereign Risk with Contingent Claims," IMF Staff Papers, Palgrave Macmillan, vol. 55(1), pages 109-148, April.
- Jan Frait & Luboš Komárek & Zlatuše Komárková, 2011. "Monetary Policy in a Small Economy after Tsunami: A New Consensus on the Horizon?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(1), pages 5-33, January.
When requesting a correction, please mention this item's handle: RePEc:cnb:ocpubc:fsr1112/3. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Babecky)
If references are entirely missing, you can add them using this form.