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Does direction of the transmission of bank risk matter? An application to the Chilean banking sector

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  • Silva, Cinthya
  • Pino, Gabriel

Abstract

This paper studies the transmission of bank risk in the Chilean banking sector by focusing on the direction of the transmission. By using a Spatial Autoregressive Panel data model, our main findings indicate the following. First, banks which maintain a high (low) proportion of interbank credits transmit risk to banks that maintain a low (high) proportion of interbank credits. Second, while small banks transmit risk to banks which are of similar size, large banks transmit risk to the whole banking sector. Finally, banks whose main clients belong to the financial establishments, insurance, real state, and services economic activity transmit risk to the rest of banks.

Suggested Citation

  • Silva, Cinthya & Pino, Gabriel, 2021. "Does direction of the transmission of bank risk matter? An application to the Chilean banking sector," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612320300568
    DOI: 10.1016/j.frl.2020.101530
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    More about this item

    Keywords

    Transmission; Bank risk; Spatial autoregressive panel model;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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