Financial connectivity and excessive liquidity: Benefit or risk?
Müge Demir and
Journal of International Financial Markets, Institutions and Money, 2019, vol. 62, issue C, 203-221
This paper explores the structure of cross-border lending market by using network analysis and examines the relationship between financial connectivity and probability of systemic crises during normal, credit boom and capital inflow upsurge periods, controlling for macroeconomic variables. A country-level panel data set for bank-to-bank and bank-to-non-bank cross-border lending markets of 13 advanced economies is used in the analysis for the 1978–2016 period. We find that a rise in financial connectivity reduces the probability of systemic crises. However, this effect is found to be mitigated or completely eliminated in credit boom and capital inflow upsurge periods in both markets. The findings suggest that bank-to-non-bank lending market is more stable in terms of both the number and the amount of lending relationships and recovered faster than bank-to-bank lending market following the recent global financial crisis.
Keywords: Cross-border banking; Network analysis; Financial connectivity; Systemic crises (search for similar items in EconPapers)
JEL-codes: F21 F34 F65 G01 G19 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:62:y:2019:i:c:p:203-221
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 Dana Niculescu ().