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Modeling interbank relations during the international financial crisis

Author

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  • Christos S Savva

    () (Cyprus University of Technology)

Abstract

This paper examines the effects of the current financial crisis on the correlations of four international banking stocks. We find that in the beginning of the crisis banks generally show a transition to a higher correlation followed by a dramatic decline towards the end of 2008. These findings are consistent with both traditional contagion theory and the more recent network theory of contagion.

Suggested Citation

  • Christos S Savva, 2011. "Modeling interbank relations during the international financial crisis," Economics Bulletin, AccessEcon, vol. 31(1), pages 916-924.
  • Handle: RePEc:ebl:ecbull:eb-10-00582
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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I1-P87.pdf
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    References listed on IDEAS

    as
    1. Annastiina Silvennoinen & Timo Teräsvirta, 2009. "Modeling Multivariate Autoregressive Conditional Heteroskedasticity with the Double Smooth Transition Conditional Correlation GARCH Model," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 7(4), pages 373-411, Fall.
    2. Julien Idier, 2011. "Long-term vs. short-term comovements in stock markets: the use of Markov-switching multifractal models," The European Journal of Finance, Taylor & Francis Journals, vol. 17(1), pages 27-48.
    3. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
    4. Berben, Robert-Paul & Jansen, W. Jos, 2005. "Comovement in international equity markets: A sectoral view," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 832-857, September.
    5. Xavier Freixas & Bruno Parigi & Jean-Charles Rochet, 2000. "Systemic risk, interbank relations, and liquidity provision by the central bank," Proceedings, Federal Reserve Bank of Cleveland, pages 611-640.
    6. Vance L. Martin & Mardi Dungey, 2007. "Unravelling financial market linkages during crises," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 89-119.
    7. Krishnamurthy, Arvind, 2000. "Comment on Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 639-640, August.
    8. Martens, Martin & Poon, Ser-Huang, 2001. "Returns synchronization and daily correlation dynamics between international stock markets," Journal of Banking & Finance, Elsevier, vol. 25(10), pages 1805-1827, October.
    9. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-350, July.
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    Cited by:

    1. Chelley-Steeley, Patricia & Lambertides, Neophytos & Savva, Christos S., 2015. "The effect of security and market order flow shocks on co-movement," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 39(C), pages 136-155.

    More about this item

    Keywords

    Financial Crises; Contagion; Interbank Markets;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets

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