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Systemic risk in Europe: deciphering leading measures, common patterns and real effects

Mikhail Stolbov () and Maria Shchepeleva
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Maria Shchepeleva: Bank of Russia

Annals of Finance, 2018, vol. 14, issue 1, 49-91

Abstract: Abstract The paper studies salient features of systemic risk in a sample of 22 European (EU and non-EU) countries during January 2010–March 2016. Building on a novel dataset and conducting an empirical horse race, we determine pivotal systemic risk measures for the sample countries. SRISK and volatility indicator tend to lead other metrics, followed by leverage. In contrast to the conventional wisdom, composite systemic risk measures aggregated with the aid of principal and independent component analysis perform worse. The leading systemic risk measures exhibit a high degree of connectedness. The VIX index, TED spread, the Composite Index of Systemic Stress (CISS) and long-term interest rates underlie their dynamics. Two clusters within the sample are identified, with CISS and long-term interest rates being crucial to distinguish between them. There is only scarce evidence for causal linkages between systemic risk and industrial production in the sample countries, based on the concurring results of standard and nonparametric Granger causality tests.

Keywords: Causality; Cluster analysis; Independent component analysis; Principal component analysis; Panel vector autoregressions; Systemic risk (search for similar items in EconPapers)
JEL-codes: C32 C38 G01 G32 (search for similar items in EconPapers)
Date: 2018
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