Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154261
Authors: 
Peltonen, Tuomas A.
Sarlin, Peter
Piloiu, Andreea
Year of Publication: 
2015
Series/Report no.: 
ECB Working Paper 1828
Abstract: 
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 with- out 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.
Subjects: 
bank distress
bank networks
systemic risk
JEL: 
G21
G33
C54
D85
ISBN: 
978-92-899-1641-7
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.