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How macroeconomic conditions affect systemic risk in the short and long-run?

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  • Kurter, Zeynep O.

    (University of Warwick)

Abstract

This study quantifies the effects of macroeconomic variables on various market-based systemic-risk measures in 24 European banks over the 2008-2019 period. In a first step, I measure daily systemic risk for banks based on ∆CoVaR, MES, and SRISK frameworks, and examine the contributions of individual banks to aggregate systemic risk during specific stress events. Systemic risk in European banks has risen in the wake of the global financial crisis and the Brexit referendum result. In a second step, I investigate how macroeconomic conditions affect systemic risk in the short and long-run. I find that three systemic risk measures have a long-run stable relationship with EU industrial production, EU inflation, Euribor, and US equity market volatility, but some variables have opposite effects in the short and long-run.

Suggested Citation

  • Kurter, Zeynep O., 2022. "How macroeconomic conditions affect systemic risk in the short and long-run?," The Warwick Economics Research Paper Series (TWERPS) 1407, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1407
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    More about this item

    Keywords

    Systemic Risk ; Value at Risk ; Quantile Regression ; DCC-GJRGARCH ; ARDL ; Banking Sector JEL classification: C22 ; G01 ; G18 ; G21 ; G32;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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