Global market conditions and systemic risks after Greece and Ireland’s financial crises (VOX)

Just how much systemic risk remains in the advanced economies? This column uses Markov-switching techniques to examine volatility in equity, interbank, sovereign credit-default swaps, and foreign-exchange markets. It finds that while overall systemic stress emanating from interbank spreads and foreign-exchange volatility has subsided, there are still pockets of systemic risk, particularly in sovereign credit default swaps and equity markets – and this is especially the case for Europe’s periphery.

 

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