@article{CoviEydam2020,
  author    = {Covi, Giovanni and Eydam, Ulrich},
  title     = {End of the sovereign-bank doom loop in the European Union?},
  series = {Journal of evolutionary economics},
  volume    = {30},
  journal   = {Journal of evolutionary economics},
  number    = {1},
  publisher = {Springer},
  address   = {Berlin ; Heidelberg ; New York},
  issn      = {0936-9937},
  doi       = {10.1007/s00191-018-0576-2},
  pages     = {5 -- 30},
  year      = {2020},
  abstract  = {In this paper we examine the relationship between the default risk of banks and sovereigns, i.e. the 'doom-loop'. Specifically, we try to assess the effectiveness of the implementation of the new recovery and resolution framework in the European Union. We use a panel with daily data on European banks and sovereigns ranging from 2012 to 2016 in order to test the effects of the Bank Recovery and Resolution Directive on the two-way feedback process. We find that there was a pronounced feedback loop between banks and sovereigns from 2012 to 2014. However, after the implementation of the European Banking Union, in 2015/2016, the magnitude of the doom-loop decreased and the spillovers became not statistically significant. Furthermore, our results suggest that the implementation of the new resolution framework is a suitable candidate to explain this finding. Overall, the results are robust across several specifications.},
  language  = {en}
}