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Systemic Contagion

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  • Soon Heng Leong

Abstract

This article unifies existing systemic risk measures to present a novel intersecting notion of systemic contagion which captures institutional risk transmission amplified by a distressed financial system. The article constructs a test statistic for systemic contagion which demonstrates its systemic capacity in testing contagion under a series of numerical experiments. Using the new test the article constructs a forward-looking directed network to empirically measure the scale of systemic contagion between leading U.S. financial institutions. The proposed systemic contagion measure stands out as it provides timely warning signals of market crashes including that driven by the recent health-induced financial crisis.

Suggested Citation

  • Soon Heng Leong, 2025. "Systemic Contagion," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 43(2), pages 468-481, April.
    • Handle: RePEc:taf:jnlbes:v:43:y:2025:i:2:p:468-481
    DOI: 10.1080/07350015.2024.2394580
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