Analyzing credit risk transmission to the non-financial sector in Europe: a network approach

Christian Gross ()

VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy from Verein für Socialpolitik / German Economic Association

Abstract: Using variance decompositions in vector auto-regressions (VARs) we model a high-dimensional network of European CDS spreads to assess the transmission of credit risk to the non-financial corporate sector. Our findings suggest a sectoral clustering in the CDS network, where financial institutions are located in the center and non-financial as well as sovereign CDS are grouped around the financial center. The network has a geographical component reflected in differences in the magnitude and direction of real-sector risk transmission across European countries. While risk transmission to the non-financial sector increases during crisis events, risk transmission within the non-financial sector remains largely unchanged.

Keywords: networks; financial-real linkages; connectedness; systemic risk; credit risk; contagion (search for similar items in EconPapers)
JEL-codes: C01 C32 G01 G15 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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https://www.econstor.eu/bitstream/10419/203645/1/VfS-2019-pid-28234.pdf (application/pdf)

Related works:
Journal Article: Analyzing credit risk transmission to the nonfinancial sector in Europe: A network approach (2020)
Working Paper: Analyzing credit risk transmission to the non-financial sector in Europe: A network approach (2019)
Working Paper: Analyzing credit risk transmission to the non-financial sector in Europe: a network approach (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc19:203645

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