Systemic Risk in European Banking - Evidence from Bivariate GARCH Models


Schröder, Michael ; Schüler, Martin


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URL: http://ub-madoc.bib.uni-mannheim.de/355
URN: urn:nbn:de:bsz:180-madoc-3553
Document Type: Working paper
Year of publication: 2003
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: G21 F34 G15 ,
Subject headings (SWD): Europa , GARCH-Prozess , Bank , Risikoanalyse
Abstract: This paper attempts to assess the Europe-wide systemic risk in banking. We employ a bivariate GARCH model to estimate conditional correlations between European bank stock indices. These correlations are used as an indication for the interdependencies amongst the banking business in Europe and hence for the systemic risk potential. We employ several tests to assess the development of systemic risk: a non-parametric test of constancy of the correlation, a test of parallel shifts in the correlation at pre-specified events, and a test for a linear time trend in the correlations. The results show that many of the conditional correlations exhibit an upward move in the last years. This is an indication that the economic factors determining the European banking business have become more similar and that the systemic risk potential has increased.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Schröder, Michael ; Schüler, Martin (2003) Systemic Risk in European Banking - Evidence from Bivariate GARCH Models. Open Access [Working paper]
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