Spillovers in Risk of Financial Institutions

John Cotter and Anita Suurlaht

No 201805, Working Papers from Geary Institute, University College Dublin

Abstract: We analyse the total and directional spillovers across a set of financial institution systemic risk state variables: credit risk, real estate market risk, interest rate risk, interbank liquidity risk and overall market risk. A multiple structural break estimation procedure is employed to detect sudden changes in the time varying spillover indices in response to major market events and policy events and policy interventions undertaken by the European Central Bank and the Bank of England. Our sample includes five European Union countries: core countries France and Germany, periphery countries Spain and Italy, and a reference country, the UK. We show that national stock markets and real estate markets have a leading role in shock transmission across selected state variables; whereas the role of the other variables reverses over the course of the crisis. Real estate market risk is also found to be mostly affected by country specific events. The shock transmission dynamics of interest rate risk and interbank liquidity risk differs for the UK and Eurozone countries; empirical results imply that interest rate changes lead changes in interbank liquidity.

Keywords: macro-financial state variables; financial crisis; spillover effects; credit default swaps; real estate risk. (search for similar items in EconPapers)
JEL-codes: G01 G15 G20 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-02-19
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn, nep-eec and nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201805.pdf First version, 2018 (application/pdf)

Related works:
Journal Article: Spillovers in risk of financial institutions (2019)
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:ucd:wpaper:201805

Access Statistics for this paper

More papers in Working Papers from Geary Institute, University College Dublin Contact information at EDIRC.
Bibliographic data for series maintained by Geary Tech ().