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Financial sector rescue programs: Domestic and cross border effects
Ist Teil von
Journal of international money and finance, 2022-10, Vol.127, p.102694, Article 102694
Ort / Verlag
Elsevier Ltd
Erscheinungsjahr
2022
Quelle
Alma/SFX Local Collection
Beschreibungen/Notizen
•We examine the financial sector stabilisation measures of the Austrian authorities.•The most effective measures are recapitalisations and public guarantees.•This applies to both their mere announcement and actual implementation.•There is a risk-shifting effect to the detriment of sovereign risk.•Interventions had positive spillover effects to the CESEE.
We assess the effectiveness of the financial sector stabilisation measures taken by the Austrian authorities in the wake of the global financial crisis. Employing an event study methodology, we evaluate domestic and cross-border effects involving Central, Eastern and South-eastern European economies. We identify recapitalisations and public guarantees as the most effective sovereign interventions. Both mitigate financial market stress at home and abroad. However, a risk-shifting effect emerges at the sovereign’s expense which undermines their effectiveness relative to monetary policy interventions. Moreover, in complement to the actual implementation, the mere announcement of interventions already mitigates financial market stress, underscoring the extent of policy credibility.