Interconnectedness and Contagion Analysis: A Practical Framework

Jana Bricco ('Gieck') and TengTeng Xu

No 2019/220, IMF Working Papers from International Monetary Fund

Abstract: The analysis of interconnectedness and contagion is an important part of the financial stability and risk assessment of a country’s financial system. This paper offers detailed and practical guidance on how to conduct a comprehensive analysis of interconnectedness and contagion for a country’s financial system under various circumstances. We survey current approaches at the IMF for analyzing interconnectedness within the interbank, cross-sector and cross-border dimensions through an overview and examples of the data and methodologies used in the Financial Sector Assessment Program. Finally, this paper offers practical advice on how to interpret results and discusses potential financial stability policy recommendations that can be drawn from this type of in-depth analysis.

Keywords: WP; equity index; bank-investment fund interlinkage; Reduce bank exposure; market data; bank-insurance nexus; default threshold; nexus analysis; Interconnectedess; Contagion; Financial Stability; Financial Systems; Risk Analysis; Systemic Risk; cross-border bank contagion; bank exposure; bank default probability; bank distress sensitivity; banks insurer; distress sensitivity; Financial Sector Assessment Program; Financial contagion; Commercial banks; Stress testing; Global (search for similar items in EconPapers)
Pages: 49
Date: 2019-10-11
New Economics Papers: this item is included in nep-ias
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Citations: View citations in EconPapers (5)

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