Banking sectors' international interconnectedness: Implications for consumption risk sharing in Europe

Thomas Nitschka

No 2012-04, Working Papers from Swiss National Bank

Abstract: Cross-border asset and liability holdings allow countries to insulate their consumption streams from idiosyncratic output shocks, i.e. consumption risk sharing. By contrast, banks' international interconnectedness spread the U.S. subprime mortgage crisis to various economies with adverse macroeconomic consequences. This paper evaluates the partial impact of banks' cross-border links on the ability of their host countries to share consumption risk internationally. It shows that the impact of banks' links to the non-bank sector in the rest-of-the-world on consumption risk sharing is negligible while strong interbank links are associated with relatively little consumption risk sharing of banks' host countries.

Keywords: banking sector; cross-border assets; consumption risk sharing; interconnectedness; systemic risk (search for similar items in EconPapers)
JEL-codes: E2 F15 G15 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-eec, nep-mac and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2012-04

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