We develop an empirical network model to study bilateral sovereign credit risk spillovers during the European debt crisis. We show that the spillover density is typically asymmetric with heavy tails. This confounds efforts to track time-variation in spillover activity using the mean-based...

We use sign-identified macroeconomic models to study the interaction of financial sector and sovereign credit risks in Europe. We find that country-specific financial sector bailout shocks do not generate strong international spillovers, because they primarily transfer private sector risk onto...

The Financial Instability Hypothesis associated with Hyman Minsky has profound implications for the conduct of monetary policy in modern capitalist economies. At its core is the proposition that the central bank may contribute to the financial fragility of leveraged firms in its pursuit of...

The Financial Instability Hypothesis associated with Hyman Minsky has profound implications for the conduct of monetary policy in modern capitalist economies. At its core is the proposition that the central bank may contribute to the financial fragility of leveraged fi rms in its pursuit of infl...