Measuring Financial Contagion and Spillover Effects with a State-Dependent Sensitivity Value-at-Risk Model

Alin Marius Andries and Elena Galasan
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Alin Marius Andries: Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iasi and Institute for Economic Forecasting, Romanian Academy, 22 Carol I Boulevard, 700505 Iasi, Romania
Elena Galasan: Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iasi and Institute for Economic Forecasting, Romanian Academy, 22 Carol I Boulevard, 700505 Iasi, Romania
Authors registered in the RePEc Author Service: Alin Marius Andrieș

Risks, 2020, vol. 8, issue 1, 1-20

Abstract: In this paper, we measure the size and the direction of the spillover effects among European commercial banks, with respect to their size, geographical position, income sources, and systemic importance for the period from 2006 to 2016, using a state-dependent sensitivity value-at-risk model, conditioning on the state of the financial market. Low during normal times, the same shocks cause notable spillover effects during the volatile period. The results suggest a high level of interconnectedness across all the European regions, highlighting the importance of large and systemic important banks that create considerable systemic risk during the entire period. Regarding the non-interest income banks, the outcomes reveals an alert signal concerning the spillovers spread to interest income banks.

Keywords: financial contagion; risk spillovers; European commercial banks (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:8:y:2020:i:1:p:5-:d:307357

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