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The reciprocal relationship between systemic risk and real economic activity

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  • Garita, Gus

Abstract

The contribution of this paper to the literature is three-fold: (1) it empirically uncovers the directionality and persistence of systemic risk surrounding "the great recession"; (2) it quantifies the reaction of the macro-economy to financial (banking) system shocks; and (3) it unearths feedback effects from the macro-economy to the (in)stability of a banking system. These contributions are attained by looking at the extremal dependence structure among banks, by presenting a multivariate framework for identifying and modeling their joint-tail distributions, and by constructing an aggregate system-wide distress index, a risk-stability index, which quantifies the systemic risk of a bank.

Suggested Citation

  • Garita, Gus, 2011. "The reciprocal relationship between systemic risk and real economic activity," MPRA Paper 33135, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:33135
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    File URL: https://mpra.ub.uni-muenchen.de/33135/1/MPRA_paper_33135.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Persistence; distress; contagion; panel VAR;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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