Conduction Mechanism Of The European Sovereign Debt Crisis

Sovereign debt crisis emerges frequently as a specific forms of financial crisis.The European sovereign debt crisis has caused a great impact on crisis states, globaleconomic, financial, social and political and then led to the weak current worldeconomic recovery. The European sovereign debt crisis is likely to cause a negativeimpact on other countries and regions especially in the background of economicglobalization. Because of facing a debt crisis with characteristics of the new era inemerging markets, research on the sovereign debt crisis before is difficult to interpret.The main incentive neither the traditional first-generation crisis emphasized fiscalimbalances nor the second-generation model emphasized self-fulfilling expectationsand current account imbalances. It is caused by Balance sheet mismatches in thevarious departments and changes in capital account which not expected. Manyeconomists use the balance sheet to re-examine how changes in the capital accountinitiate and conduct sovereign debt crisis from the perspective of the national balancesheet.First of all, the research results about crisis transmission mechanism aresummarized on the basis of traditional theories and methods of the internationalfinancial crisis. Secondly, on the perspective of describing the theory and applicationof the national balance sheet, the paper analysis the formation mechanism of thesovereign debt crisis. It is caused by uneven of capital institutional and debt structure.Researching the transmission mechanism from balance sheet channel of inside andoutside the euro area with the combination of normative and empirical analysis.Based on EU trade, assisted analysis of heterogeneous panel is applied to analyzingthe impact of the crisis and then draw some conclusions. At last, on the basis ofcombining theoretical research with countermeasure research, the paper analyze theimpact of sovereign debt crisis on China and put forward some suggestions targeted. Through the analysis of the national balance sheet, some major economic issueslike liquidity trap, great recession and new international financial crisis which aredifficult to explain by mainstream economics can be sorted out. It is also provide anew basis for the response to the various crises.