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Assessment of Cross-Border Transmission of Systemic Financial Risk in EU Countries

Alexander M. Karminsky () and Ekaterina V. Seryakova ()
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Alexander M. Karminsky: Moscow State Institute of International Relations, Moscow 119454, Russian Federation
Ekaterina V. Seryakova: Moscow State Institute of International Relations, Moscow 119454, Russian Federation

Finansovyj žhurnal — Financial Journal, 2019, issue 5, 119-129

Abstract: Amid global financial instability timely identification and propagation of systemic risks within both national and international banking systems becomes essential. It implies that it is highly important to assess not only inner factors of systemic banking risk and channels of its propagation, but also external sources which are due to cross-boarder spread of systemic banking risks. This article focuses on researching cross-boarder mechanism of systemic risks spread using method of decomposition of the variance of errors of VAR-models basing on monthly aggregated country-level indices of financial stress for EU-countries (CLIFS: Country-Level Index of Financial Stress). This investigation seems to be acute for coordinating macroprudential policies of national regulators of EU- countries and mastering macroprudential policy of Bank of Russia due to high globalization of financial markets of EU-countries and growth of financial innovations. The matrix of connectedness of 27 countries belonging to EU allows to obtain index of systemic connectedness (84 %), which reflects high dependence of each country on external shocks transferred from other countries-members of EU. Indices of net connectedness allow to divide countries into two groups: net-acceptors and net-donors of systemic risks. Empirical analysis has confirmed the hypothesis that countries subject more to inner shocks — Greece, Cyprus, Bulgaria and Croatia-have really survived starting from 2008 banking crises, explained with internal imbalances of banking systems.

Keywords: systemic risks; banking system; transmission of banking risks; financial stability (search for similar items in EconPapers)
JEL-codes: E69 F30 G17 G21 G32 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.31107/2075-1990-2019-5-119-129

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Handle: RePEc:fru:finjrn:190509:p:119-129