Assessing Structure-Related Systemic Risk in Advanced Economies

Martin O'Brien () and Michael Wosser
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Michael Wosser: Central Bank of Ireland

No 3/RT/22, Research Technical Papers from Central Bank of Ireland

Abstract: We examine the role that economic size, the degree of trade and financial openness, dependancy on inward foreign direct investment and various aspects of banking system concentration play in determining systemic risk across advanced economies. Across the three systemic risk measures evaluated, we find that small, financially open and FD Idependent economies with more concentrated banking systems are more susceptible to severe tail risk outcomes and higher costs of crises than the average advanced economy. Small and financially open economies appear more likely to experience a systemic banking crisis than their counterparts. In most instances, the joint presence of these structural characteristics combine to further increase systemic risk levels and do not offset each other. Our findings suggest that a more activist macroprudential policy stance may be warranted for countries sharing these characteristics, so that the level of resilience is commensurate to the higher level of risk.

Keywords: Systemic Risk; systemic banking crises; macroprudential policy; macrof inancial structure; macroprudential policy; financial stability. (search for similar items in EconPapers)
JEL-codes: E5 G01 G21 G28 (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-cba, nep-fdg and nep-rmg
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Citations: View citations in EconPapers (1)

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