Miguel C. Herculano
- 2 August 2018
- WORKING PAPER SERIES - No. 81Details
- Abstract
- I examine the relevance of contagion in explaining financial distress in the US banking system by identifying the component of bank level probabilities that is due to contagion. Identification is achieved after controlling for macrofinancial and bank specific shocks that have similar consequences to contagion. I use a Bayesian spatial autoregressive model that allows for time-dependent network interactions, and find that bank default likelihoods depend, to a large extent, on peer effects that account on average for approximately 35 per cent of total distress. Furthermore, I find evidence of significant heterogeneity amongst banks and some institutions to be systemically more important that others, in terms of peer effects.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G01 : Financial Economics→General→Financial Crises
C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages