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External Linkages and Contagion Risk in Irish Banks

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  • Elena Duggar
  • Srobona Mitra

Abstract

Increasing financial integration makes the assessment of cross-country linkages crucial for effective financial surveillance. This paper estimates contagion risk between large Irish banks and European and U.S. banks during 1994–2005, using distance-to-default measures and the methodology of extreme value theory. Employing an ordered logit model, and controlling for Ireland-specific and global shocks, we find evidence of significant contagion risk coming from the United Kingdom, the United States, and the Netherlands toward Ireland. We also find that patterns of contagion to Irish banks have shifted over time, coming from the United Kingdom in the pre-euro period and from the United States in the post-2001 period.

Suggested Citation

  • Elena Duggar & Srobona Mitra, 2009. "External Linkages and Contagion Risk in Irish Banks," IMF Staff Papers, Palgrave Macmillan, vol. 56(4), pages 758-786, November.
    • Handle: RePEc:pal:imfstp:v:56:y:2009:i:4:p:758-786
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    Cited by:

    1. Paul Armstrong-Taylor, 2014. "Effects of Trade and Financial Links on the Transmission of GDP Growth," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 9(4), pages 556-572, December.
    2. Su, Ender & Wong, Kai Wen, 2018. "Measuring bank downside systemic risk in Taiwan," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 172-193.

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