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

Label
The Bright and the Dark Side of Cross-Border Banking Linkages, Sònia Muñoz, Ryan Scuzzarella, Martin Cihak
Language
eng
Abstract
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
Bibliography note
Includes bibliographical references
resource.governmentPublication
international or intergovernmental publication
Literary Form
non fiction
Main title
The Bright and the Dark Side of Cross-Border Banking Linkages
Nature of contents
dictionaries
Responsibility statement
Sònia Muñoz, Ryan Scuzzarella, Martin Cihak
Series statement
IMF Working Papers
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 Interconnectedness5. Global Banking Network: 1977 vs. 2009V. Estimating a Financial Stability Model; A. Parametric Estimation (Probit Model); 1. Parametric Estimates (Probit Model); B. Nonparametric Estimation (Threshold Approach); VI. Concluding Remarks; I. Description of Data Sources and Transformations; II. Measuring Interconnectedness: A Primer; III. Simulation Framework; References; Footnotes
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