Measuring bank contagion in Europe using binary spatial regression models

Raffaella Calabrese (), Johan A. Elkink () and Paolo Giudici
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Johan A. Elkink: University College Dublin

Journal of the Operational Research Society, 2017, vol. 68, issue 12, 1503-1511

Abstract: Abstract The recent European sovereign debt crisis clearly illustrates the importance of measuring the contagion effects of bank failures. Indeed, to better understand and monitor contagion risk, the European Central Bank has assumed the supervision of the largest banks in each of the member states. We propose a measure of contagion risk based on the spatial autocorrelation parameter of a binary spatial autoregressive model. Using different specifications of the interbank connectivity matrix, we estimate the contagion parameter for banks within the Eurozone, between 1996 and 2012. We provide evidence of high levels of systemic risk due to contagion during the European sovereign debt crisis.

Keywords: contagion risk; spatial autoregressive models; European banks (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (9)

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Working Paper: Measuring Bank Contagion in Europe Using Binary Spatial Regression Models (2014)
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DOI: 10.1057/s41274-017-0189-4

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