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Did the Euro Increase Systemic Risk?

39 Pages Posted: 13 Jul 2013  

Eric de Bodt

Université de Lille

Frederic Lobez

University of Lille II - GERME Research Center

Armin Schwienbacher

SKEMA Business School

Date Written: July 9, 2013

Abstract

We examine the effect of the introduction of the euro on the level of systemic risk for countries that adopted the common currency (euro-zone countries). Our measure of systemic risk is ∆CoVaR, introduced by Adrian and Brunnermeier (2010). We analyze the 1990-2010 period, use a large cross-section of banks from more than 56 countries and implement differences-in-differences tests. We report a significant increase in systemic risk for euro-zone countries after the introduction of the euro. We explore different economic channels that may explain how the euro affected the countries’ systemic risk.

Keywords: systemic risk, euro, monetary union

Suggested Citation

de Bodt, Eric and Lobez, Frederic and Schwienbacher, Armin, Did the Euro Increase Systemic Risk? (July 9, 2013). Available at SSRN: https://ssrn.com/abstract=2292858 or http://dx.doi.org/10.2139/ssrn.2292858

Eric De Bodt

Université de Lille ( email )

1 place Déliot, BP381
59020 Lille Cedex
France
+03 20 90 74 77 (Phone)
+03 20 90 77 02 (Fax)

HOME PAGE: http://www.edebodt.net

Frederic Lobez

University of Lille II - GERME Research Center ( email )

1, Place Deliote BP 381
Lille, 59000
France
03 20 99 74 75 (Phone)
03-20-90-77-02 (Fax)

Armin Schwienbacher (Contact Author)

SKEMA Business School ( email )

Lille
France

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