Asset Price Bubbles and Systemic Risk

Markus Brunnermeier, Simon Rother () and Isabel Schnabel

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We analyze the relationship between asset price bubbles and systemic risk, using bank-level data covering almost thirty years. Systemic risk of banks rises already during a bubble’s build-up phase, and even more so during its bust. The increase differs strongly across banks and bubble episodes. It depends on bank characteristics (especially bank size) and bubble characteristics, and it can become very large: In a median real estate bust, systemic risk increases by almost 70 percent of the median for banks with unfavorable characteristics. These results emphasize the importance of bank-level factors for the build-up of financial fragility during bubble episodes.

Keywords: Asset price bubbles; systemic risk; financial crises; credit booms; CoVaR; MES (search for similar items in EconPapers)
JEL-codes: E32 G01 G12 G20 G32 (search for similar items in EconPapers)
Pages: 83
Date: 2019-05
New Economics Papers: this item is included in nep-cfn, nep-his, nep-mac, nep-rmg and nep-ure
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Asset Price Bubbles and Systemic Risk (2020)
Working Paper: Asset Price Bubbles and Systemic Risk (2019)
Working Paper: Asset Price Bubbles and Systemic Risk (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2019_095

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