Sovereign debt default and banking in a currency union

Reference : Sovereign debt default and banking in a currency union


	Document type :	Scientific congresses, symposiums and conference proceedings : Unpublished conference
	Discipline(s) :	Business & economic sciences : Macroeconomics & monetary economics
	To cite this reference:	http://hdl.handle.net/10993/17940

Title :	Sovereign debt default and banking in a currency union
Language :	English
Author, co-author :	Perego, Erica [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
	Pierrard, Olivier [Central Bank of Luxembourg > Economics and Research]
Publication date :	27-May-2014
Peer reviewed :	Yes
Audience :	International
Event name :	14th Belgian Financial Research Forum, Louvain la Neuve
Event date :	27/05/2014
Keywords :	[en] Sovereign default ; Banking ; Currency Union
Abstract :	[en] This paper analyzes the role of banking in the transmission of sovereign debt default within a currency union. We build a 2-country (core and periphery) new-Keynesian model with an endogenous possibility of default on the periphery public debt. We introduce alternative banking representations, going from full integration to fragmentation. We calibrate the model on euro area data and show that the best fit to empirical data arises when we introduce some degree of fragmentation. However, we observe that a well integrated banking sector would reduce the negative consequences of default at the EA aggregated level and limit the welfare cost of stabilizing policies.
Target :	Researchers ; Students
Permalink :	http://hdl.handle.net/10993/17940

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