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Financial bridges and network communities

Roberto Casarin, Michele Costola and Erdem Yenerdag

No 208, SAFE Working Paper Series from Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt

Abstract: We analyze the global financial crisis and the European sovereign debt crisis showing that the European network exhibits a strong community structure with two main blocks acting as shock spreader and receiver, respectively. We provide evidence of the prominent role played by insurances in the spread of systemic risk in both crises and demonstrate that institutions with a large number of inter-community linkages (community bridges) are more relevant in spreading contagion than institutions with large centrality. Network measures based on the community structure can provide a better description of the financial connectedness and effective early warning indicators for financial losses.

Keywords: Systemic Risk; Financial Institutions; Network Communities; Financial Crises (search for similar items in EconPapers)
JEL-codes: G12 G29 C51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:208

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