Abstract

http://ssrn.com/abstract=2326429
 


 



Does Financial Connectedness Predict Crises?


Camelia Minoiu


International Monetary Fund (IMF)

Chanhyun Kang


University of Maryland - College of Computer, Mathematical and Physical Sciences

V.S. Subrahmanian


University of Maryland - College of Computer, Mathematical and Physical Sciences

Anamaria Berea


George Mason University - Department of Economics

April 15, 2014


Abstract:     
The global financial crisis has reignited interest in models of crisis prediction. It has also raised the question whether financial interconnectedness -- 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 during the 1978-2010 period. Our results indicate that increases in a country's own connectedness and decreases in its neighbors' connectedness are associated with a higher probability of banking crises after controlling for macroeconomic fundamentals. Our findings suggest that financial interconnectedness has early-warning potential, especially for the 2007-2010 wave of systemic banking crises.

Number of Pages in PDF File: 48

Keywords: early warning systems, systemic risk, financial networks, banking crises

JEL Classification: G01, F36, F47

working papers series


Download This Paper

Date posted: September 16, 2013 ; Last revised: April 16, 2014

Suggested Citation

Minoiu, Camelia and Kang, Chanhyun and Subrahmanian, V.S. and Berea, Anamaria, Does Financial Connectedness Predict Crises? (April 15, 2014). Available at SSRN: http://ssrn.com/abstract=2326429 or http://dx.doi.org/10.2139/ssrn.2326429

Contact Information

Camelia Minoiu (Contact Author)
International Monetary Fund (IMF) ( email )
1700 19th Street, NW
Washington, DC 20431
United States
2026239731 (Phone)
HOME PAGE: http://www.camelia-minoiu.com/
Chanhyun Kang
University of Maryland - College of Computer, Mathematical and Physical Sciences ( email )
College Park, VA 20742-3255
United States
V.S. Subrahmanian
University of Maryland - College of Computer, Mathematical and Physical Sciences ( email )
College Park, VA 20742-3255
United States
HOME PAGE: http://www.cs.umd.edu/~vs/
Anamaria Berea
George Mason University - Department of Economics ( email )
4400 University Drive
Fairfax, VA 22030
United States
Feedback to SSRN


Paper statistics
Abstract Views: 275
Downloads: 83
Download Rank: 127,035

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.375 seconds