Systemic risk contagion within US states

Tonmoy Choudhury and Kevin Daly

Studies in Economics and Finance, 2021, vol. 38, issue 4, 836-860

Abstract: Purpose - This study aims to examine the systemic risk contagion in banks from 15 US states using extreme shocks in their distance to risk. Design/methodology/approach - The authors contemplate a model that inputs co-exceedances in the base US states’ banking sector as the dependent variable and the co-exceedances in other states’ banking sector (along with other underlying variables of a banking system) as the explanatory variables. Findings - The authors find smaller states transmit and receive more systemic shocks than their larger counterparts and larger states exhibit a better shock-resisting capacity than their smaller counterparts. The authors also find that bigger shocks are more contagious than the smaller shocks. Originality/value - This will be the first paper that will investigate the inner linkage of US states’ banking network using three different distance to risk methods, thus providing timely guidance for regulators.

Keywords: US banking; Global systemically important banks (GSIBs); Distance to default (DD); Distance to insolvency (DI); Distance to capital (DC); Logistic regression model; G1; G14; G17; G21; G31 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:sef-08-2020-0342

DOI: 10.1108/SEF-08-2020-0342

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