Dungey, Mardi and Flavin, Thomas and Lagoa-Varela, Dolores (2018) Are banking shocks contagious? Evidence from the eurozone. Journal of Banking and Finance. pp. 1-17. ISSN 0378-4266

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Abstract

We analyze the transmission of shocks between global banking, domestic banking and the non-financial sector for eleven Eurozone countries. Using a Markov-switching Factor augmented VAR model, we dis- tinguish between contagion, interdependence and decoupling as shock transmission mechanisms during the ‘crisis’ regime. Contagion played a role in propagating global banking shocks to the banking sectors of smaller states, exacerbating the crisis in these countries. In contrast, the non-financial sectors suffered lit- tle contagion from either external or domestic banking shocks, and generally managed to decouple from the banking industry –indicative of being able to source alternative financing and shield themselves from the crisis. However, shocks originating in the non-financial sector trigger contagious effects for both the domestic banking sector and, to a lesser extent global banking, thereby acting as a source of fragility for the financial sector during crisis periods.

Item Type:	Article
Keywords:	Contagion; Shock transmission; Banking crises; Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes, State Space Models; Financial Crises; Banks, Depository Institutions, Micro Finance Institutions, Mortgages;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	11391
Identification Number:	https://doi.org/10.1016/j.jbankfin.2018.07.010
Depositing User:	Thomas Flavin
Date Deposited:	24 Oct 2019 15:46
Journal or Publication Title:	Journal of Banking and Finance
Publisher:	Elsevier
Refereed:	Yes
URI:	Publisher
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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