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Sovereign Stress, Banking Stress, and Corporate Financing Costs in the Euro Area

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  • Holtemöller, Oliver
Abstract
In this paper, we employ firm-level data to analyze to what extent financing conditions of non-financial corporations in the Euro Area depend on country-specific factors, in particular the respective country's government bond yield and the share of non-performing loans to the corporate sector. Moreover, we assess whether this relationship has changed during the European debt crisis. It turns out that the increase in corporate financing costs during the year 2011 can partially be explained by increasing government bond yields. However, the further increase of corporate financing costs in stressed Euro area countries during the year 2012 can not be explained by these yields, but by the share of non-performing loans. This finding suggests that the ECB's policy of reducing corporate financing costs in stressed countries via government bond purchases may not be effective.

Suggested Citation

  • Holtemöller, Oliver, 2016. "Sovereign Stress, Banking Stress, and Corporate Financing Costs in the Euro Area," VfS Annual Conference 2016 (Augsburg): Demographic Change 145820, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc16:145820
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    References listed on IDEAS

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    1. Ms. Bergljot B Barkbu & Pelin Berkmen & Pavel Lukyantsau & Mr. Sergejs Saksonovs & Hanni Schoelermann, 2015. "Investment in the Euro Area: Why Has It Been Weak?," IMF Working Papers 2015/032, International Monetary Fund.
    2. Simon Gilchrist & Egon ZakrajŠEk, 2013. "The Impact of the Federal Reserve's Large-Scale Asset Purchase Programs on Corporate Credit Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(s2), pages 29-57, December.
    3. Joseph Gagnon & Matthew Raskin & Julie Remache & Brian Sack, 2011. "The Financial Market Effects of the Federal Reserve's Large-Scale Asset Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 3-43, March.
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    5. Antoun de Almeida, Luiza, 2015. "Firms’ balance sheets and sectoral inflation in the euro area during the financial crisis," Economics Letters, Elsevier, vol. 135(C), pages 31-33.
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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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