Abstract
The first Greek bailout on April 11, 2010 triggered a significant reevaluation of sovereign credit risk across Europe. We exploit this event to examine the transmission of sovereign to corporate credit risk. A 10% increase in sovereign credit risk raises corporate credit risk on average by 1.1% after the bailout. The evidence is suggestive of risk spillovers from sovereign to corporate credit risk through a financial and a fiscal channel, as the effects are more pronounced for firms that are bank or government dependent. We find no support for indirect risk transmission through a deterioration of macroeconomic fundamentals.
| Original language | English |
|---|---|
| Pages (from-to) | 857-891 |
| Number of pages | 35 |
| Journal | Journal of Money, Credit and Banking |
| Volume | 50 |
| Issue number | 5 |
| Early online date | 21 May 2018 |
| DOIs | |
| Publication status | Published - Aug 2018 |
Funding
European Council confirms that Greece’s measures suffice to meet the budgetary targets. No request for financial support from the Greek government. This notion of control was successfully held up by the Greek government until the weekend preceding April 11, 2010, when Greece requested financial support from the EU. The finance ministers convened immediately and agreed upon a support package of up to €30 billion of bilateral loans over the next 3 years, with additional financing by the IMF. In return, the Greek authorities would develop a decisive consolidation program, closely monitored by the so-called troika (European Commission, IMF, and the ECB).
| Funders | Funder number |
|---|---|
| Greek government | |
| European Commission |
Keywords
- bailout
- contagion
- credit risk
- F34
- F36
- G12
- G15
- Greece
- H81
- risk transmission
