Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/178646
Authors: 
Casarin, Roberto
Costola, Michele
Yenerdag, Erdem
Year of Publication: 
2018
Series/Report no.: 
SAFE Working Paper 208
Abstract: 
The paper analyses the contagion channels of the European financial system through the stochastic block model (SBM). The model groups homogeneous connectivity patterns among the financial institutions and describes the shock transmission mechanisms of the financial networks in a compact way. We analyse the global financial crisis and European sovereign debt crisis and show that the network exhibits a strong community structure with two main blocks acting as shock spreader and receiver, respectively. Moreover, we provide evidence of the prominent role played by insurances in the spread of systemic risk in both crises. Finally, we demonstrate that policy interventions focused on institutions with inter-community linkages (community bridges) are more effective than the ones based on the classical connectedness measures and represents consequently, a better early warning indicator in predicting future financial losses.
Subjects: 
Systemic Risk
Financial Institutions
Network Communities
Financial Crises
JEL: 
G12
G29
C51
Document Type: 
Working Paper

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