Sovereign risk and deposit dynamics: evidence from Europe

David Grigorian, Vlad Manole

Research output: Contribution to journalArticle

1 Scopus citations


The unprecedented expansion of sovereign balance sheets since the beginning of the global crisis has given a new meaning to the term sovereign risk. Developments in Europe since early 2010 revealed new challenges for the functioning of private banks in an environment of heightened sovereign risk and may have contributed to deleveraging. The article uses an innovative way of measuring the perception of sovereign risk and its impact. Using an extension of a common market discipline framework, it shows that exposure to sovereign risk may have limited the ability of banks in Europe to collect deposits. Potential identification issues between deposits and bank efficiency are controlled by using data envelopment analysis (DEA). The results are robust to inclusion of conventional measures of bank performance and the sector-wide holdings of foreign sovereign debt.

Original languageEnglish (US)
Pages (from-to)2851-2860
Number of pages10
JournalApplied Economics
Issue number29
StatePublished - Jun 21 2017

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


  • European crisis
  • Sovereign risk
  • bank deposits
  • market discipline

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