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The Bright and the Dark Side of Cross-Border Banking Linkages, Sònia Muñoz, Ryan Scuzzarella, Martin Cihak

When a country's banking system becomes more linked to the global banking network, does that system get more or less prone to a banking crisis? Using model simulations and econometric estimates based on a world-wide dataset, we find an M-shaped relationship between financial stability of a country's banking sector and its interconnectedness. In particular, for banking sectors that are not very connected to the global banking network, increases in interconnectedness are associated with a reduced probability of a banking crisis. Once interconnectedness reaches a certain value, further increases in interconnectedness can increase the probability of a banking crisis. Our findings suggest that it may be beneficial for policies to support greater interlinkages for less connected banking systems, but after a certain point the advantages of increased interconnectedness become less clear
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. Financial Stability Consequences of Increasing Interconnectedness; A. Network Analysis; B. Banking Crisis Literature; III. Overview of Input Data; A. Measuring Interconnectedness; 1. Movements in Centrality Measures for Selected Countries, 1985Q1-2009Q3; B. Measuring Banking (In)stability; 2. Banking Crises vs. Interconnectedness: A First Look; C. Other Data; IV. Simulations; 3. Simulations: Banking Crises vs. Interconnectedness; 4. Nonparametric Analysis Results: Upstream Interconnectedness
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (76 p.)
Specific Material Designation
Form Of Item

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