Cross-Border Bank Contagion in Europe

By Reint Gropp, M. Duca, J. Vesala. Social Science Research Network, 2012

131 citations recorded by the source corpus.

This paper analyses cross-border contagion in a sample of European banks from January 1994 to January 2003. We use a multinomial logit model to estimate the number of banks in a given country that experience a large shock on the same day (“coexceedances”) as a function of variables measuring common shocks and coexceedances in other countries. Large shocks are measured by the bottom 95th percentile of the distribution of the first difference in the daily distance to default of the bank. We find evidence in favour of significant cross-border contagion. We also find some evidence that since the introduction of the euro cross-border contagion may have increased. The results seem to be very robust to changes in the specification.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/e05e7b27319ddfa7b6690ef5e99a81716fec67e4

Citations in the corpus

• Is There a Competition-Stability Trade-Off in European Banking? (2017, unknown): “From this perspective, the 8The derivation of distance-to-default is described in detail in (Gropp and Moerman, 2004; Gropp et al., 2009).”
• Simulation methods to assess the danger of contagion in interbank markets (2011, unknown): “More recent papers are Hawkesby et al. (2007) and Gropp et al. (2009).”
• Spillover Effects among Financial Institutions: A State-Dependent Sensitivity Value-at-Risk Approach (2014, unknown): “6 Gropp, Lo Duca, and Vesala (2009) and Gropp and Moerman (2004), as well as Hart-mann, Straetmans, and De Vries (2007), show that distress in one banking system transmits across national borders to other banking systems.”