Séminaire NANCY – Sophie Béreau (BETA)

Détails de l'événement :

“Contagion in the Banking Industry: a Robust-to-Endogeneity Analysis”

Papier co-écrit avec Nicolas Debarsy, Cyrille Dossougoin et Jean-Yves Gnabo

Le séminaire se fera sous une forme hybride avec une diffusion sur Teams et la présence de Sophie en salle 1 Jacamon à APT. Pour ceux qui ne sont pas dans l’équipe BETA Nancy sur Teams, le séminaire peut se rejoindre directement via: https://lef-nancy.org/perm/join.html.

Abstract: What drives financial contagion? The empirical literature aimed at modeling financial risk spillovers in crisis periods and documenting the role of contagion channels is subject to an endogeneity problem, as the channel itself can respond to a change in the level of risk. We tackle this issue by using a novel spatial econometric estimation procedure based on a control function approach and offer “robust-to-endogeneity” evidence on the role of indirect financial contagion channels in the banking industry. Our estimations, based on data collected for 28 large US banks during the financial crisis period (2007Q3-2013Q2), confirm that several channels are endogeneous. Accounting for endogeneity is proved to be important for recovering reliable estimates of transmission mechanisms. Banks’ common exposure as well as similarities in fundamentals and investment strategies appear as significant drivers of contagion. Based on these estimates, we can derive a simple systemic risk indicators called the “Interaction-Based Centrality ” index, that can be used by regulatory authorities and policy makers to track vulnerable institutions in times of crisis.