Asset Price Bubbles and Systemic Risk

Markus Brunnermeier (), Simon Rother and Isabel Schnabel ()

No 12362, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper empirically analyzes the effects of asset price bubbles on systemic risk. Based on a broad sample of banks from 17 OECD countries between 1987 and 2015, we show that asset price bubbles in stock and real estate markets raise systemic risk at the bank level. The strength of the effect depends strongly on bank characteristics (bank size, loan growth, leverage, and maturity mismatch) as well as bubble characteristics (length and size). These findings suggest that the adverse effects of bubbles can be mitigated substantially by strengthening the resilience of financial institutions.

Keywords: Asset price bubbles; CoVaR; Credit Booms; Financial crises; systemic risk (search for similar items in EconPapers)
JEL-codes: E32 G01 G12 G20 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fmk, nep-mac, nep-rmg and nep-ure
Date: 2017-10
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Related works:
Working Paper: Asset Price Bubbles and Systemic Risk (2019)
Working Paper: Asset Price Bubbles and Systemic Risk (2019)
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