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Systemic risk propagation in the Eurozone: A multilayer network approach

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  • Foglia, Matteo
  • Pacelli, Vincenzo
  • Wang, Gang-Jin

Abstract

In this paper, we study systemic risk propagation by exploring the dynamic mechanism of financial contagion among Eurozone countries. Using a multilayer information spillover network framework, we can consider the sovereign, banking and equity sectors’ risk spillover between countries simultaneously. This specification helps us to better identify the systemically important countries, i.e., the Eurozone financial stability. The findings emphasise the prominence of considering systemic risk propagation in a multilayer network structure. In fact, our empirical analysis suggests that considering intra-layer and inter-layer propagation is essential to gain a deeper insight into Eurozone systemic risk mechanisms.

Suggested Citation

  • Foglia, Matteo & Pacelli, Vincenzo & Wang, Gang-Jin, 2023. "Systemic risk propagation in the Eurozone: A multilayer network approach," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 332-346.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:332-346
    DOI: 10.1016/j.iref.2023.06.035
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    Cited by:

    1. Ouyang, Zisheng & Zhou, Xuewei & Lu, Min & Liu, Ke, 2024. "Imported financial risk in global stock markets: Evidence from the interconnected network," Research in International Business and Finance, Elsevier, vol. 69(C).
    2. Matteo Foglia & Vasilios Plakandaras & Rangan Gupta & Elie Bouri, 2023. "Multi-Layer Spillovers between Volatility and Skewness in International Stock Markets Over a Century of Data: The Role of Disaster Risks," Working Papers 202337, University of Pretoria, Department of Economics.
    3. Foglia, Matteo & Plakandaras, Vasilios & Gupta, Rangan & Ji, Qiang, 2025. "Long-span multi-layer spillovers between moments of advanced equity markets: The role of climate risks," Research in International Business and Finance, Elsevier, vol. 74(C).
    4. Li, Yanshuang & Shi, Yujie & Shi, Yongdong & Xiong, Xiong & Yi, Shangkun, 2024. "Time-frequency extreme risk spillovers between COVID-19 news-based panic sentiment and stock market volatility in the multi-layer network: Evidence from the RCEP countries," International Review of Financial Analysis, Elsevier, vol. 94(C).
    5. Bochmann, Paul & Kagerer, Benedikt & Pancaro, Cosimo, 2024. "Recent evidence on the sovereign-bank nexus in the euro area," Finance Research Letters, Elsevier, vol. 69(PB).

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    More about this item

    Keywords

    Systemic risk; Multilayer network spillover; Eurozone; Sovereign-bank nexus;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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