Does Financial Connectedness Predict Crises?
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Summary:
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.
Series:
Working Paper No. 2013/267
Subject:
Banking crises Early warning systems Financial crises Global financial crisis of 2008-2009 Systemic crises
English
Publication Date:
December 24, 2013
ISBN/ISSN:
9781475554250/1018-5941
Stock No:
WPIEA2013267
Pages:
44
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