The determinants of systemic risk contagion

Burak Atasoy, İbrahim Özkan and Lütfi Erden

Economic Modelling, 2024, vol. 130, issue C

Abstract: The elevated interconnectedness of the global financial system has resulted in an increased frequency of financial crises, characterized by the swift transmission of turmoil between countries. This study introduces a novel quantile-connectedness-based contagion metric and investigates the drivers of systemic risk contagion, employing methodologies that address endogeneity and time-variation. We analyze data spanning two decades from 27 international banks and encompassing balance sheet-derived variables. Our findings indicate that contagion during the 2004–2021 period is largely driven by credit risk and leverage, while the impact of size and capital adequacy weakens after 2012. Furthermore, funding structure and profitability only display a significant effect during the 2014–2017 and Covid-19 periods, respectively. We also observe distinct peaks and troughs in each bank's systemic risk propagation, although they share commonalities with their counterparts. Given our findings, we suggest a holistic systemic risk surveillance model that employs high-frequency data and simultaneously incorporates multiple risk factors.

Keywords: Contagion; Systemic risk; Banking; Spillovers; Tail risk (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S026499932300408X
Full text for ScienceDirect subscribers only

Related works:
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:eee:ecmode:v:130:y:2024:i:c:s026499932300408x

DOI: 10.1016/j.econmod.2023.106596

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().