Abstract
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. Applying partial wavelet coherency analysis, the sovereign-bank dependencies significantly weaken once the influence of Economic Policy Uncertainty is eliminated. This shows a tightening of the sovereign-bank nexus in times of great policy uncertainty.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
