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Cross-Border Bank Contagion in Europe

Reint Gropp, Marco Lo Duca and Jukka Vesala

No 175, Working Paper Series: Finance and Accounting from Department of Finance, Goethe University Frankfurt am Main

Abstract: This paper analyses cross-border contagion in a sample of European banks from January 1994 to January 2003. We use a multinomial logit model to estimate the number of banks in a given country that experience a large shock on the same day (“coexceedances”) as a function of variables measuring common shocks and coexceedances in other countries. Large shocks are measured by the bottom 95th percentile of the distribution of the first difference in the daily distance to default of the bank. We find evidence in favour of significant cross-border contagion. We also find some evidence that since the introduction of the euro cross-border contagion may have increased. The results seem to be very robust to changes in the specification.

JEL-codes: F36 G15 G21 (search for similar items in EconPapers)
Date: 2007-02
New Economics Papers: this item is included in nep-ban, nep-dcm and nep-eec
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Related works:
Journal Article: Cross-Border Bank Contagion in Europe (2009) Downloads
Working Paper: Cross-border bank contagion in Europe (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fra:franaf:175

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