The Empirical Analysis About Linkage Effects Of Spanish Bank Risk And Sovereign Debt Risk

The outbreak of the European sovereign debt crisis into recession again, the recovery will take time. It is more difficult to recovery of economic in Spain, because its real estate market bust,bank risk and sovereign debt risk makes its economic conditions worsened. Spain risk conduction path is that the collapse of its housing market, causing bank crisis, and then the Spanish government through issuing sovereign debt bailout the banks, with the public debt increasing,causing higher government spending and government debt skyrocketed, subsequently intensified by the Spain sovereign debt crisis. To analyze the linkage effects of bank and sovereign debt risk after bailout, contributes to know about the risk process. Therefore studying the linkage between the bank and the sovereign debt risk is warning to China and prevent China embarked on a path similar to Spain. And research to how to avoid the real estate bubble, the banking crisis and the sovereign debt crisis on China has important theoretical and practical significance.This paper is divided into live parts. The first part introduces the paper’s research background, significance, literature overview, contents, research methods and innovation. The second part is the relevant theoretical overview, it introduces banking crisis theory from the point of macro and micro view, and summarizes the rescue theory about the lender of last resort of Thornton and Bagehot. The third part introduces Spain crisis conduction path from four aspects, including Spain macro-economic condition, real estate, banks and sovereign debt.To analyze the causes of Spain crisis,government rescue measures and effects. The fourth part is the empirical research of the relationship of bank risk and sovereign debt risk after bank industry bailout, then verifies the economic cycle effects. The fifth part is policy recommendation. Main introduces how to prevent China’s real estate bubble, how to reduce bank’s non-performing loans and how to avoid sovereign debt crisis,etc.This paper uses case studies to analyze the linkage effects of the banking and sovereign debt risk from economics and empirical two aspects,the use of the Spanish banking sector credit default swap prices (CDS),sovereign debt credit default swap prices (CDS) and term-spreads for the model sample data, after the bailout of Spain, the banks’credit risk decreases only temporarily and then increases in tandem with sovereign CDS spreads. This article sought to put forward China’s policy recommendations through the analysis of Spain crisis.