EconPapers    
Economics at your fingertips  
 

Analyzing Credit Risk Transmission to the Non-Financial Sector in Europe: A Network Approach

Christian Gross and Pierre Siklos ()

No 7218, CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster

Abstract: A high-dimensional network of European CDS spreads is modeled to assess the transmission of credit risk to the non-financial corporate sector in Europe. We build on a network connectedness approach that uses variance decompositions in vector autoregressions (VARs) to characterize the dependence structure in the panel of CDS spreads. Our main findings suggest a sectoral clustering in the CDS network, where financial institutions are located in the center of the network and non-financial as well as sovereign CDS are grouped around the financial center. The network has a geographical component re flected in differences in the magnitude and direction of real-sector risk transmission across European countries. We identify an increase in the transmission of financial and sovereign credit risk to the non-financial sector during the global financial crisis and the European debt crisis. By contrast, we find that the transmission of risk within the non-financial sector remains largely unaffected by crisis events.

Keywords: networks; financial-real linkages connectedness; systemic risk; credit risk; contagion (search for similar items in EconPapers)
JEL-codes: C01 C32 G01 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-eec and nep-rmg
Date: 2018-03
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
https://www.wiwi.uni-muenster.de/cqe/sites/cqe/fil ... r/cqe_wp_72_2018.pdf Version of March 2018 (application/pdf)

Related works:
Working Paper: Analyzing credit risk transmission to the non-financial sector in Europe: a network approach (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cqe:wpaper:7218

Access Statistics for this paper

More papers in CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster Am Stadtgraben 9, 48143 Münster, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Susanne Deckwitz ().

 
Page updated 2019-01-19
Handle: RePEc:cqe:wpaper:7218