The reciprocal relationship between systemic risk and real economic activity

Gus Garita

MPRA Paper from University Library of Munich, Germany

Abstract: The contribution of this paper to the literature is three-fold: (1) it empirically uncovers the directionality and persistence of systemic risk surrounding "the great recession"; (2) it quantifies the reaction of the macro-economy to financial (banking) system shocks; and (3) it unearths feedback effects from the macro-economy to the (in)stability of a banking system. These contributions are attained by looking at the extremal dependence structure among banks, by presenting a multivariate framework for identifying and modeling their joint-tail distributions, and by constructing an aggregate system-wide distress index, a risk-stability index, which quantifies the systemic risk of a bank.

Keywords: Persistence; distress; contagion; panel VAR (search for similar items in EconPapers)
JEL-codes: C10 E44 G01 (search for similar items in EconPapers)
Date: 2011-09-02
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:33135

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