Network linkages to predict bank distress

Andreea Constantin, Tuomas A. Peltonen, Peter Sarlin

Forskningsoutput: TidskriftsbidragArtikelVetenskapligPeer review

12 Citeringar (Scopus)

Sammanfattning

Building on the literature on systemic risk and financial contagion, the paper introduces estimated network linkages into an early-warning model to predict bank distress among European banks. We use multivariate extreme value theory to estimate equity-based tail-dependence networks, whose links proxy for the markets’ view of bank interconnectedness in case of elevated financial stress. The paper finds that early warning models including estimated tail dependencies consistently outperform bank-specific benchmark models without networks. The results are robust to variation in model specification and also hold in relation to simpler benchmarks of contagion. Generally, this paper gives direct support for measures of interconnectedness in early-warning models, and moves toward a unified representation of cyclical and cross-sectional dimensions of systemic risk.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftJournal of financial stability
Volym35
UtgåvaApril
Sidor (från-till)226-241
Antal sidor16
ISSN1572-3089
DOI
StatusPublicerad - 22.11.2016
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

Nyckelord

  • 511 Nationalekonomi

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