Inflation and systemic risk: A network econometric model

Javier Sánchez García and Salvador Cruz Rambaud

Finance Research Letters, 2023, vol. 56, issue C

Abstract: This paper builds a network econometric model capable of analysing the impact of inflation on systemic risk. Its main contribution is the identification of a robust inverse relationship which reverses when controlling monetary policy. This reveals that the former effect is due to monetary policy reactions to inflation. It is further analysed whether this effect comes from overindebtness as in a Minsky moment. There is no evidence supporting it, which suggests that mechanisms other than excess credit underlie such a relationship. The results presented in this paper are of particular importance for understanding monetary policy reactions to current inflationary cycles.

Keywords: Inflation; Systemic risk; Macro-financial links; Connectedness; Financial networks (search for similar items in EconPapers)
JEL-codes: E31 E44 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004762

DOI: 10.1016/j.frl.2023.104104

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