Systemic risk propagation in the Eurozone: A multilayer network approach

Matteo Foglia, Vincenzo Pacelli and Gang-Jin Wang

International Review of Economics & Finance, 2023, vol. 88, issue C, 332-346

Abstract: In this paper, we study systemic risk propagation by exploring the dynamic mechanism of financial contagion among Eurozone countries. Using a multilayer information spillover network framework, we can consider the sovereign, banking and equity sectors’ risk spillover between countries simultaneously. This specification helps us to better identify the systemically important countries, i.e., the Eurozone financial stability. The findings emphasise the prominence of considering systemic risk propagation in a multilayer network structure. In fact, our empirical analysis suggests that considering intra-layer and inter-layer propagation is essential to gain a deeper insight into Eurozone systemic risk mechanisms.

Keywords: Systemic risk; Multilayer network spillover; Eurozone; Sovereign-bank nexus (search for similar items in EconPapers)
JEL-codes: E44 G01 G10 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:88:y:2023:i:c:p:332-346

DOI: 10.1016/j.iref.2023.06.035

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