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CoMap: Mapping Contagion in the Euro Area Banking Sector

Mehmet Ziya Gorpe, Giovanni Covi () and Christoffer Kok

No 19/102, IMF Working Papers from International Monetary Fund

Abstract: This paper presents a novel approach to investigate and model the network of euro area banks’ large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and systemic risk of the euro area banking system based on bilateral linkages. We develop a Contagion Mapping model fully calibrated with bank-level data to study the contagion potential of an exogenous shock via credit and funding risks. We find that tipping points shifting the euro area banking system from a less vulnerable state to a highly vulnerable state are a non-linear function of the combination of network structures and bank-specific characteristics.

Keywords: Banking sector; Financial crises; Macroprudential policies and financial stability; Financial institutions; Central banks; Systemic Risk,Network Analysis,Interconnectedness,Large Exposures,Stress Test,Macroprudential Policy.,euro area,fire-sale,large exposure,interbank,fire sale (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec
Date: 2019-05-10
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