Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257913 
Year of Publication: 
2019
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 7 [Issue:] 3 [Article No.:] 75 [Publisher:] MDPI [Place:] Basel [Year:] 2019 [Pages:] 1-25
Publisher: 
MDPI, Basel
Abstract: 
In this paper, we measure the systemic risk with a novel methodology, based on a 'spatial-temporal' approach. We propose a new bank systemic risk measure to consider the two components of systemic risk: cross-sectional and time dimension. The aim is to highlight the 'time-space dynamics' of contagion, i.e., if the CDS spread of bank i depends on the CDS spread of other banks. To do this, we use an advanced spatial econometrics design with a time-varying spatial dependence that can be interpreted as an index of the degree of cross-sectional spillovers. The findings highlight that the Eurozone banks have strong spatial dependence in the evolution of CDS spread, namely the contagion effect is present and persistent. Moreover, we analyse the role of the European Central Bank in managing contagion risk. We find that monetary policy has been effective in reducing systemic risk. However, the results show that systemic risk does not imply a policy intervention, highlighting how financial stability policy is not yet an objective.
Subjects: 
bank risk-taking
macroprudential policy
spatial contagion
systemic risk measure
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
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