Contagion in the European sovereign debt crisis

Brent Glover, Seth Richards-Shubik 12 November 2014

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Fear of financial contagion was a major motivation behind the bailouts and other interventions provided during the recent sovereign debt crisis in Europe. Given the interconnected network of financial relationships among European nations, the potential for contagion seemed self-evident. But what really was – and is – the magnitude of the risk of sovereign contagion in Europe? 

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Topics:  EU policies Financial markets

Tags:  sovereign debt crisis, Europe, financial contagion

The ghost of Deauville

Ashoka Mody 07 January 2014

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The aversion to debt restructuring in the Eurozone has been remarkable, even though public debt ratios in several countries are well above the IMF-identified critical debt overhang threshold of 100% of GDP (IMF 2012). By early 2010, some recognised the urgency of restructuring Greek public debt (Calomiris 2010). But the official position between late 2009 and early 2011 deemed even Greek debt to be sustainable. Beyond the particularities of Greece, general principles were invoked. In the words of Cottarelli et al.

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Topics:  Financial markets International finance

Tags:  eurozone, sovereign debt, Eurozone crisis, sovereign debt restructuring, financial contagion, Deauville

Institutional investor flows and the geography of contagion

Damien Puy 13 December 2013

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International financial contagion implies that countries can be affected by similar economic shocks even in the absence of common fundamentals. Since the Asian financial crisis, academics and policymakers have been eager to better understand the role played by financial intermediaries in propagating shocks across borders. Along with banks, the fund industry has attracted particular attention and is now recognised as an important vehicle of financial contagion (Gelos 2011). Yet, little is known about the geography of such contagion.

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Topics:  Global crisis International finance

Tags:  mutual funds, financial contagion