The debate about TARGET2, the payment system of the European System of Central Banks (ESCB), has resulted in controversial discussions in Germany in recent years. The present study by DIW Berlin concludes that fears often expressed in this context of the risks to Germany are largely unfounded....

This paper analyzes sovereign risk contagion in the Eurozone using an extension to the canonical model for contagion proposed by Pesaran and Pick (2007) and Metiu (2012) to allow for time-varying coefficients. This becomes necessary due to changes in the risk pricing of sovereign bonds since the...

During the Global Financial Crisis, regulators imposed short-selling bans to protect financial institutions. The rationale behind the bans was that "bear raids", driven by short-sellers, would increase the individual and systemic risk of financial institutions, especially for institutions with...

There is a growing consensus that part of the surge in government bond spreads during the EMU debt crisis can be explained by wake-up-call contagion. Evidence on pure contagion however is very mixed and there are no insights into the dynamics of these effects. As a contribution to fill this gap,...

This paper introduces a new methodology to date systemic financial stress events in a transparent, objective and reproducible way. The financial cycle is captured by a monthly country-specific financial stress index. Based on a Markov-switching model, high financial stress regimes are...

We examine whether there is contagion from the U.S. stock market to six Central and Eastern European stock markets. We use a novel measure of contagion that examines whether volatility shocks in the U.S. stock market coupled with negative returns are followed by higher co-exceedance between U.S....

This paper sets the background for the Special Issue of the Journal of Empirical Finance on the European Sovereign Debt Crisis. It identifies the channel through which risks in the financial industry leaked into the public sector. It discusses the role of the bank rescues in igniting the...

We use financial accounts data at sector level to construct financial networks for individual euro area countries. We then connect the country-level networks to one large “Macro Network”, using information on cross-border linkages between the national banking sectors. We then evaluate the...

We use realised variances and co-variances based on intraday data from Eurozone sovereign bond market to measure the dependence structure of eurozone sovereign yields. Our analysis focuses on the impact of news, obtained from the Eurointelligence newsflash, on the dependence structure. More news...