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Contagion and banking crisis – International evidence for 2007–2009
Citation
Dungey, M and Gajurel, D, Contagion and banking crisis - International evidence for 2007-2009, Journal of Banking and Finance, 60 pp. 271-283. ISSN 0378-4266 (2015) [Refereed Article]
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Copyright Statement
Copyright 2015 The Authors Licensed under Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) https://creativecommons.org/licenses/by-nc-nd/4.0/
DOI: doi:10.1016/j.jbankfin.2015.08.007
Abstract
Policy makers aim to avoid banking crises, and although they can to some extent control domestic conditions, internationally transmitted crises are difficult to tackle. This paper identifies international contagion in banking during the 2007–2009 crisis for 54 economies. We identify three channels of contagion – systematic, idiosyncratic and volatility – and find evidence for these in 45 countries. Banking crises are overwhelmingly associated with the presence of both systematic and idiosyncratic contagion. The results reveal that crisis shocks transmitted from a foreign jurisdiction via idiosyncratic contagion increase the likelihood of a systemic crisis in the domestic banking system by almost 37 percent, whereas increased exposure via systematic contagion does not necessarily destabilize the domestic banking system. Thus while policy makers and regulatory authorities are rightly concerned with the systematic transmission of banking crises, reducing the potential for idiosyncratic contagion can importantly reduce the consequences for the domestic economy
Item Details
Item Type: | Refereed Article |
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Keywords: | Global financial crisis; Financial contagion; Banking institutions; Asset pricing |
Research Division: | Economics |
Research Group: | Applied economics |
Research Field: | Macroeconomics (incl. monetary and fiscal theory) |
Objective Division: | Economic Framework |
Objective Group: | Macroeconomics |
Objective Field: | Fiscal policy |
UTAS Author: | Dungey, M (Professor Mardi Dungey) |
UTAS Author: | Gajurel, D (Dr Dinesh Gajurel) |
ID Code: | 106958 |
Year Published: | 2015 |
Web of Science® Times Cited: | 60 |
Deposited By: | TSBE |
Deposited On: | 2016-02-29 |
Last Modified: | 2018-03-20 |
Downloads: | 179 View Download Statistics |
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