Impact of the coronavirus pandemic crisis on the financial system in the eurozone

Abstract

The stress in the financial system in five eurozone countries (Germany, France, Italy, Portugal, and Spain) was not connected before the COVID-19 pandemic crisis. Credit default swap premiums were priced independently, not incorporating the sovereign risk of the eurozone as a whole. However, during the period of pandemic crisis, the stress was connected in five countries. The financial market was cautious about the increased fiscal deficit caused by massive spending in the pandemic crisis, fearing that the deficit might cause increased risk in the financial system of the eurozone as a whole. The symptoms of financial crisis sprouted after the pandemic crisis started. We need to monitor whether countermeasures taken by European Central Bank (ECB) and European Union (EU) contribute to the stability of financial system in the eurozone.

The market reaction to syndicated loan announcements before and during the COVID-19 pandemic and the role of corporate governance

“…The pandemic-driven crisis motivates research to focus on the impact of COVID-19 on stock markets as well as on financing and cost of capital ( Goodell, 2020 ). A number of studies evaluate the impact of the COVID-19 pandemic on stock markets ( Al-Awadhi et al, 2020 ; Ali et al, 2020 ; Baker et al, 2020 ; He et al, 2020 ) and the existence of safe haven investment opportunities ( Conlon and McGee, 2020 ; Conlon et al, 2020 ; Goodell and Goutte, 2020 ), while others investigate its effects on credit markets ( Halling et al, 2020 ; Ito, 2020 ), investor behavior (Harron and Rizvi, 2020; Ortmann et al, 2020 ) and liquidity of firms ( De Vito and Gomez, 2020 ; Li et al, 2020 ). However, there is no empirical evidence with regard to the impact of the COVID-19 pandemic on the valuation effects of firms’ financing decisions.…”

Sustainable Economic Growth Support through Credit Transmission Channel and Financial Stability: In the Context of the COVID-19 Pandemic

“…Similarly, Adrian and Natalucci state that the financial systems have already been significantly affected by COVID-19, with prices of risk assets falling, liquidity decreasing, and borrowing costs rising [56]. Whereas the COVID-19 pandemic has clearly affected the overall world economic condition as well as various sectors of the economy, the scientific research of this effect has recently emerged, though the empirical analysis is still quite limited [52,53,[56][57][58][59][60][61][62].…”

“…Ito (2020) used the premium of sovereign credit default swaps as the measure of stress caused by COVID-19 to the financial system and found out that the COVID-19 pandemic is followed by certain signs of financial instability, together with concerns about the sustainability of public finance [57]. Tokic (2020) argued that eventually, the COVID-19 pandemic causes such financial consequences as an increase in inflation and interest rate [59].…”

COVID-19 pandemic and stability of stock market—A sectoral approach

“…It has been relatively short time to observe the phenomenon and obtain data reflecting its impact on financial statements but works related to various aspects of COVID-19 in finance and capital markets have been published. The financial issues during the pandemic have been a subject of investigations so far in scope of insurance [22], banking [23][24][25] or financial system [26]. One can also find results of research performed in other financial aspects linked with COVID-19, such as those presenting the influence of the dynamics of the panic level due to COVID-19 shock onto movements of the exchange rates [27].…”