Estimating Global Bank Network Connectedness / Mert Demirer, Francis X. Diebold, Laura Liu, Kamil Yılmaz.

Format:

Book

Author/Creator:

Demirer, Mert.

Contributor:

National Bureau of Economic Research.

Diebold, Francis X.

Liu, Laura.

Yılmaz, Kamil.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23140.

NBER working paper series no. w23140

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

We use LASSO methods to shrink, select and estimate the high-dimensional 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. Statically, we find that global bank equity connectedness has a strong geographic component, whereas country sovereign bond connectedness does not. Dynamically, we find that equity connectedness increases during crises, with clear peaks during the Great Financial Crisis and each wave of the subsequent European Debt Crisis, and with movements coming mostly from changes in cross-country as opposed to within-country bank linkages.

Notes:

Print version record

February 2017.