Tackling the volatility paradox: spillover persistence and systemic risk

Christian Kubitza

No 2981, Working Paper Series from European Central Bank

Abstract: Financial losses can have persistent effects on the financial system. This paper proposes an empirical measure for the duration of these effects, Spillover Persistence. I document that Spillover Persistence is strongly correlated with financial conditions; during banking crises, Spillover Persistence is higher, whereas in the run-up phase of stock market bubbles it is lower. Lower Spillover Persistence also associates with a more fragile system, e.g., a higher probability of future crises, consistent with the volatility paradox. The results emphasize the dynamics of loss spillovers as an important dimension of systemic risk and financial constraints as a key determinant of persistence. JEL Classification: E44, G01, G12, G20, G32

Keywords: asset price bubbles; financial crises; fire sales; fragility; systemic risk (search for similar items in EconPapers)
Date: 2024-09
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-fmk, nep-ipr and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2981~1ee9cdf8d2.en.pdf (application/pdf)

Related works:
Working Paper: Tackling the Volatility Paradox: Spillover Persistence and Systemic Risk (2021)
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:ecb:ecbwps:20242981

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().