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Modeling interbank relations during the international financial crisis

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  • Christos S Savva

    (Cyprus University of Technology)

Abstract

This paper examines the effects of the current financial crisis on the correlations of four international banking stocks. We find that in the beginning of the crisis banks generally show a transition to a higher correlation followed by a dramatic decline towards the end of 2008. These findings are consistent with both traditional contagion theory and the more recent network theory of contagion.

Suggested Citation

  • Christos S Savva, 2011. "Modeling interbank relations during the international financial crisis," Economics Bulletin, AccessEcon, vol. 31(1), pages 916-924.
    • Handle: RePEc:ebl:ecbull:eb-10-00582
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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I1-P87.pdf
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    References listed on IDEAS

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    1. Annastiina Silvennoinen & Timo Teräsvirta, 2009. "Modeling Multivariate Autoregressive Conditional Heteroskedasticity with the Double Smooth Transition Conditional Correlation GARCH Model," Journal of Financial Econometrics, Oxford University Press, vol. 7(4), pages 373-411, Fall.
    2. Julien Idier, 2011. "Long-term vs. short-term comovements in stock markets: the use of Markov-switching multifractal models," The European Journal of Finance, Taylor & Francis Journals, vol. 17(1), pages 27-48.
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    4. Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 611-638, August.
    5. Krishnamurthy, Arvind, 2000. "Comment on Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 639-640, August.
    6. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-350, July.
    7. Berben, Robert-Paul & Jansen, W. Jos, 2005. "Comovement in international equity markets: A sectoral view," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 832-857, September.
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    Cited by:

    1. Chelley-Steeley, Patricia & Lambertides, Neophytos & Savva, Christos S., 2013. "Illiquidity shocks and the comovement between stocks: New evidence using smooth transition," Journal of Empirical Finance, Elsevier, vol. 23(C), pages 1-15.
    2. Patricia Chelley‐Steeley & Neophytos Lambertides & Christos S. Savva, 2019. "Sentiment, order imbalance, and co‐movement: An examination of shocks to retail and institutional trading activity," European Financial Management, European Financial Management Association, vol. 25(1), pages 116-159, January.
    3. Chelley-Steeley, Patricia & Lambertides, Neophytos & Savva, Christos S., 2015. "The effect of security and market order flow shocks on co-movement," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 39(C), pages 136-155.

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    More about this item

    Keywords

    Financial Crises; Contagion; Interbank Markets;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets

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