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Transatlantic systemic risk

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  • Trapp, Monika
  • Wewel, Claudio
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    Abstract

    In this paper we study systemic risk for the US and Europe. We show that banks’ exposures to common risk factors are crucial for systemic risk. We come to this conclusion by first showing that relations between US and European banks are smaller than within each region. We then show that European banks react more strongly to the onset of the financial crisis than US banks. Regarding the consequences of systemic risk, we show that dependence between the banking sector and a wide range of real sectors is limited. Our results imply that regulators and supervisors should address international bank dependencies arising from common risk factors, while recessions in real sectors due to bank defaults should be a secondary concern.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 37 (2013)
    Issue (Month): 11 ()
    Pages: 4241-4255

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    Handle: RePEc:eee:jbfina:v:37:y:2013:i:11:p:4241-4255

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Systemic risk; Banking sector; Real sectors; Regulation; Copula;

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    Cited by:
    1. Wilmar Alexander Cabrera Rodríguez & Luis Fernando Melo Velandia & Daniel Parra Amado, 2014. "Relación entre el riesgo sistémico del sistema financiero y el sector real: un enfoque FAVAR," Borradores de Economia 810, Banco de la Republica de Colombia.
    2. Yang, Lu & Hamori, Shigeyuki, 2014. "Dependence structure between CEEC-3 and German government securities markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 109-125.

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