Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129366
Authors: 
Demirer, Mert
Diebold, Francis X.
Liu, Laura
Yılmaz, Kamil
Year of Publication: 
2015
Series/Report no.: 
Koç University-TÜSİAD Economic Research Forum Working Paper Series 1512
Abstract: 
We use lasso methods to shrink, select and estimate the network linking the publicly-traded subset of the world's top 150 banks, 2003-2014. We characterize static network connectedness using full-sample estimation and dynamic network connectedness using rolling-window estimation. Statistically, we find that global banking connectedness is clearly linked to bank location, not bank assets. Dynamically, we find that global banking connectedness displays both secular and cyclical variation. The secular variation corresponds to gradual increases/decreases during episodes of gradual increases/decreases in global market integration. The cyclical variation corresponds to sharp increases during crises, involving mostly cross-country, as opposed to within-country, bank linkages.
Subjects: 
systemic risk
connectedness
systemically important financial institutions
vector autoregression
variance decomposition
lasso
elastic net
adaptive lasso
adaptive elastic net
JEL: 
C32
G21
Document Type: 
Working Paper

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