European Parliament Library

Does Financial Connectedness Predict Crises?, Camelia Minoiu, Chungwon Kang, V.S. Subrahmanian, Anamaria Berea

Abstract
The global financial crisis has reignited interest in models of crisis prediction. It has also raised the question whether financial connectedness - a possible source of systemic risk - can serve as an early warning indicator of crises. In this paper we examine the ability of connectedness in the global network of financial linkages to predict systemic banking crises. Our results indicate that increases in a country's financial interconnectedness and decreases in its neighbors' connectedness are associated with a higher probability of banking crises after controlling for macroeconomic fundamentals
Table Of Contents
Cover; Contents; 1. Introduction; 2. Data and methods; 2.1 Data description; 2.2 Global connectivity: Stylized facts; 2.3 Classification algorithm; 3. Results: Connectivity and banking crises; 3.1 Exploring the data: Conditional correlations; 3.2 Results from the classification algorithm; 3.3 Results from regression analysis; 3.4 In- and out-of-sample performance; 4. Conclusions; List of figures; 1. Global banking network in 1980 vs 2007; 2. Network density and total exposures; List of tables; 1. Average network indicators over time; 3. Financial connectedness around systemic banking crises
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (45 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781484331316

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