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Measuring Connectedness between the Largest Banks

Author

Listed:
  • Galina Hale
  • Jose A. Lopez
  • Shannon Sledz

Abstract

The financial crisis provided a stark example of how interconnected the financial system is. Since then, researchers have developed several ways to monitor patterns of connectedness within the banking system. A key challenge is removing the impact of conditions that affect all banks in order to highlight evidence of direct connectedness. A new measure filters these common factors from bank stock market data. Estimates using this method show how different assumptions can affect conclusions about the connections among banks.

Suggested Citation

  • Galina Hale & Jose A. Lopez & Shannon Sledz, 2019. "Measuring Connectedness between the Largest Banks," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00186
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