Financial Bridges and Network Communities

47 Pages Posted: 14 May 2018 Last revised: 16 Apr 2019

See all articles by Roberto Casarin

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics

Michele Costola

Goethe University Frankfurt - Research Center SAFE

Erdem Yenerdag

Washington University in St. Louis - Department of Economics

Date Written: September 29, 2018

Abstract

We analyze the global financial crisis and the European sovereign debt crisis showing that the European network exhibits a strong community structure with two main blocks acting as shock spreader and receiver, respectively. We provide evidence of the prominent role played by insurances in the spread of systemic risk in both crises and demonstrate that institutions with a large number of inter-community linkages (community bridges) are more relevant in spreading contagion than institutions with large centrality. Network measures based on the community structure can provide a better description of the financial connectedness and effective early warning indicators for financial losses.

Keywords: Systemic Risk, Financial Institutions, Network Communities, Financial Crises

JEL Classification: G12, G29, C51

Suggested Citation

Casarin, Roberto and Costola, Michele and Yenerdag, Erdem, Financial Bridges and Network Communities (September 29, 2018). SAFE Working Paper No. 208. Available at SSRN: https://ssrn.com/abstract=3178053 or http://dx.doi.org/10.2139/ssrn.3178053

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics ( email )

San Giobbe 873/b
Venice, 30121
Italy
+39 030.298.91.49 (Phone)
+39 030.298.88.37 (Fax)

HOME PAGE: http://venus.unive.it/r.casarin/

Michele Costola (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Erdem Yenerdag

Washington University in St. Louis - Department of Economics ( email )

One Brookings Drive
St. Louis, MO 63130
United States

HOME PAGE: http://www.erdemyenerdag.com

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