Footnote:
In: Finance Research Letters, No. 102038, April 2021
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 17, 2020 erstellt
Description:
This paper examines the impact of policy uncertainty on the Sovereign-Bank Nexus over various time-scales and frequencies. Considering Credit Default Swap premia from 32 banks in 10 countries, cross-wavelet analysis shows that sovereign default risk leads banking sector default risk in the short-run, while the relation reverses in the medium-run. Periods of high sovereign-bank dependence, moreover, coincide with periods of great political uncertainty. Specifically, Economic Policy Uncertainty leads sovereign and bank default risk for a horizon of up to 1 year. This constitutes a tightening of the Sovereign-Bank Nexus in times of uncertain election outcomes and great Economic Policy Uncertainty