Date: 2015
Type: Article
Cross-border interbank networks, banking risk and contagion
Journal of financial stability, 2015, Vol. 18, pp. 19-32
TONZER, Lena, Cross-border interbank networks, banking risk and contagion, Journal of financial stability, 2015, Vol. 18, pp. 19-32
- https://hdl.handle.net/1814/63105
Retrieved from Cadmus, EUI Research Repository
Recent events have highlighted the role of cross-border linkages between banking systems in transmitting local developments across national borders. This paper analyzes whether international linkages in interbank markets affect the stability of interconnected banking systems and channel financial distress within a network consisting of banking systems of the main advanced countries for the period 1994–2012. Methodologically, I use a spatial modeling approach to test for spillovers in cross-border interbank markets. The results suggest that foreign exposures in banking play a significant role in channeling banking risk: I find that countries that are linked through foreign borrowing or lending positions to more stable banking systems abroad are significantly affected by positive spillover effects. From a policy point of view, this implies that in stable times, linkages in the banking system can be beneficial, while they have to be taken with caution in times of financial turmoil affecting the whole system.
Additional information:
Available online 19 February 2015
Cadmus permanent link: https://hdl.handle.net/1814/63105
Full-text via DOI: 10.1016/j.jfs.2015.02.002
ISSN: 1572-3089
Publisher: Elsevier
Earlier different version: http://hdl.handle.net/1814/32105
Version: Is based on author's EUI PhD thesis, 2014
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