Temporal networks in the analysis of financial contagion

Fabio Franch, Luca Nocciola and Angelos Vouldis

No 2667, Working Paper Series from European Central Bank

Abstract: This paper studies the dynamics of contagion across the banking, insurance and shadow banking sectors of 16 advanced economies in the period 2006-2018. We construct Granger causality-in-risk networks and introduce higher-order aggregate networks and temporal node centralities in an economic setting to capture non-Markovian network features. Our approach uncovers the dynamics of financial contagion as it is transmitted across segments of the financial system and jurisdictions. Temporal centralities identify countries in distress as the nodes through which contagion propagates. Moreover, the banking system emerge as the primary source and transmitter of stress while banks and shadow banks are highly interconnected. The insurance sector is found to contribute less to stress transmission in all periods, except during the global financial crisis. Our approach, as opposed to one that uses memoryless measures of network centrality, is able to identify more clearly the nodes that are critical for the transmission of financial contagion. JEL Classification: C02, C22, G01, G2

Keywords: financial networks; GARCH; Granger causality-in-tail; non-Markovian; systemic risk (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-isf and nep-net
Note: 2600378
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2667~231d6bc4aa.en.pdf (application/pdf)

Related works:
Journal Article: Temporal networks and financial contagion (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20222667

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().