IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v24y2019i2p963-990.html

Interconnectedness of the banking sector as a vulnerability to crises

Author

Listed:
  • Tuomas Antero Peltonen
  • Michela Rancan
  • Peter Sarlin

Abstract

This paper uses macro‐network to measure the interconnectedness of the banking sector and relates it to banking crises in Europe. Beyond cross‐border financial linkages of the banking sector, the macronetwork also accounts for financial linkages to the other main financial and nonfinancial sectors within the economy. We find that a more central position of the banking sector in the macronetwork significantly increases the probability of a banking crisis. By analysing the different types of risk exposures, our evidence shows that credit is an important source of vulnerability. Finally, our early‐warning models augmented with interconnectedness measures outperform traditional models in terms of out‐of‐sample predictions.

Suggested Citation

  • Tuomas Antero Peltonen & Michela Rancan & Peter Sarlin, 2019. "Interconnectedness of the banking sector as a vulnerability to crises," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(2), pages 963-990, April.
    • Handle: RePEc:wly:ijfiec:v:24:y:2019:i:2:p:963-990
    DOI: 10.1002/ijfe.1701
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.1701
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.1701?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    More about this item

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:ijfiec:v:24:y:2019:i:2:p:963-990. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.