Estimating Global Bank Network Connectedness

Mert Demirer (), Francis Diebold, Laura Liu and Kamil Yilmaz ()
Additional contact information
Mert Demirer: Department of Economics, Massachusetts Institute of Technology

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We use lasso methods to shrink, select and estimate the 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. Statistically, we find that global banking connectedness is clearly linked to bank location, not bank assets. Dynamically, we find that global banking connectedness displays both secular and cyclical variation. The secular variation corresponds to gradual increases/decreases during episodes of gradual increases/decreases in global market integration. The cyclical variation corresponds to sharp increases during crises, involving mostly cross-country, as opposed to within-country, bank linkages.

Keywords: Systemic risk; connectedness; systemically important financial institutions; vector autoregression; variance decomposition; lasso; elastic net; adaptive lasso; adaptive elastic net (search for similar items in EconPapers)
JEL-codes: C32 G21 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-07-25, Revised 2015-07-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://economics.sas.upenn.edu/sites/default/files/filevault/15-025.pdf (application/pdf)

Related works:
Journal Article: Estimating global bank network connectedness (2018)
Working Paper: Estimating Global Bank Network Connectedness (2017)
Working Paper: Estimating Global Bank Network Connectedness (2015)
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:pen:papers:15-025

Access Statistics for this paper

More papers in PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 133 South 36th Street, Philadelphia, PA 19104. Contact information at EDIRC.
Bibliographic data for series maintained by Administrator ().