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Has the global banking system become more fragile over time?

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  • Anginer, Deniz
  • Demirguc-Kunt, Asli

Abstract

We examine the evolution of credit risk co-dependence in the banking sectors of over 65 countries. We find that there has been a significant increase in default risk co-dependence over the 3-year period leading up to the financial crisis. We also find that countries that are more integrated with liberalized financial systems have seen a greater rise in co-dependence in their banking sectors. This negative effect of financial openness is mitigated by a strong institutional environment that allows for efficient public and private monitoring of financial institutions.

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  • Anginer, Deniz & Demirguc-Kunt, Asli, 2014. "Has the global banking system become more fragile over time?," Journal of Financial Stability, Elsevier, vol. 13(C), pages 202-213.
  • Handle: RePEc:eee:finsta:v:13:y:2014:i:c:p:202-213
    DOI: 10.1016/j.jfs.2014.02.003
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    More about this item

    Keywords

    Banking crises; Systemic risk; Systemic fragility; Bank default risk; Distance-to-default; Merton model;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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