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Contagion and banking crisis International evidence for 20072009

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 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 20072009 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
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
Author:Dungey, M (Professor Mardi Dungey)
Author:Gajurel, D (Dr Dinesh Gajurel)
ID Code:106958
Year Published:2015
Web of Science® Times Cited:4
Deposited By:Tasmanian School of Business and Economics
Deposited On:2016-02-29
Last Modified:2017-11-22
Downloads:68 View Download Statistics

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