Banking networks, systemic risk, and the credit cycle in emerging markets

Sanjiv Das (), Madhu Kalimipalli and Subhankar Nayak

Journal of International Financial Markets, Institutions and Money, 2022, vol. 80, issue C

Abstract: We study how globalization impacts systemic risk in emerging markets. We extend a large literature on systemic risk in the US, Europe, and other developed countries to emerging markets, which are relatively under-researched. Our findings are based on a large-scale empirical examination of systemic risk among 1048 financial institutions in a sample of 23 emerging markets, broken down into 5 regions, along with 369 U.S. financial institutions. Using an additively decomposable systemic risk score that combines banking system interconnectedness with default probabilities, systemic risk is quantified for each region, across time. The empirical analyses suggest that emerging markets’ systemic risk is heterogeneous across regions, is strongly dependent on the interconnectedness of the banking system within each region, and drives the level of default risk in each region, while the regions are compartmentalized away from each other and insulated from the United States. The systemic risk score may be used as a policy variable in each emerging market region to manage the credit cycle. Our evidence is consistent with the notion that globalization engenders financial stability and does not lead to large systemic risk spillovers across emerging market regions.

Keywords: Systemic risk; Network risks; Default risk; Emerging markets; Financial institutions (search for similar items in EconPapers)
JEL-codes: G00 G01 G10 G15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S104244312200107X
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:intfin:v:80:y:2022:i:c:s104244312200107x

DOI: 10.1016/j.intfin.2022.101633

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().