We test whether financial fluctuations affect firms' decisions, through their impact on banks' cost of funding. We exploit two shocks to Italian bank CDS spreads and equity valuations: the 2007-2009 financial crisis and the 2010-2012 sovereign debt crisis. Using newly available data linking over...

We test whether adverse changes to banks' market valuations during the financial and sovereign debt crises, and the associated increase in banks'cost of funding, affected firms' real decisions. Using new data linking over 3,000 non-financial Italian firms to their bank(s), we find that increases...

This paper proposes a novel framework identifying sovereign systemic risk zones. We first explore the cross-dynamics of sovereign CDS in terms of time-changing contagion measures based on copulas and then assemble these measures together with country-specific fundamentals through recursive...