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Estimating Global Bank Network Connectedness

Mert Demirer, Francis Diebold (), Laura Liu () and Kamil Yilmaz ()

No 23140, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use LASSO methods to shrink, select and estimate the high-dimensional network linking the publicly-traded subset of the world's top 150 banks, 2003-2014. We characterize static network connectedness using full-sample estimation and dynamic network connectedness using rolling-window estimation. Statically, we find that global bank equity connectedness has a strong geographic component, whereas country sovereign bond connectedness does not. Dynamically, we find that equity connectedness increases during crises, with clear peaks during the Great Financial Crisis and each wave of the subsequent European Debt Crisis, and with movements coming mostly from changes in cross-country as opposed to within-country bank linkages.

JEL-codes: C01 C32 G21 (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-ban and nep-net
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Published as Mert Demirer & Francis X. Diebold & Laura Liu & Kamil Yilmaz, 2018. "Estimating global bank network connectedness," Journal of Applied Econometrics, vol 33(1), pages 1-15.

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Journal Article: Estimating global bank network connectedness (2018) Downloads
Working Paper: Estimating Global Bank Network Connectedness (2015) Downloads
Working Paper: Estimating Global Bank Network Connectedness (2015) Downloads
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