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Credit contagion between financial systems

Natalia Podlich and Michael Wedow

No 2011,15, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: We examine contagion from a number of financial systems to the German financial system using the information content of CDS prices in a GARCH model. After controlling for common factors which may cause comovement in security prices, we find evidence for contagion from the US and European financial systems. Our results additionally confirm that the set up of the financial rescue scheme in Germany partially shielded German banks but not insurance companies from contagion. Overall, our results suggest that contagion from dealer banks have the most prominent effect on the German financial system. While dealer banks impact on German banks and insurance companies in a similar way, a deterioration in the CDS spreads of dealer banks has a particularly pronounced effect on German dealer banks.

Keywords: Systemic Risk; CDS Spreads; Contagion; OTC Dealer (search for similar items in EconPapers)
JEL-codes: G14 G21 G28 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ban and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp2:201115

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