Decomposing systemic risk : the roles of contagion and common exposures / by Grzegorz Hałaj and Ruben Hipp.: FB3-5/2024-19E-PDF
"We estimate a structural model derived from the balance sheet identity to evaluate the effects of contagion and common exposure on banks' capital, which varies endogenously as a function of assets and liabilities. Through a regression approach inspired by the literature on structural vector autoregression, we infer the interdependence of banks' financial conditions. In this model, contagion can occur through direct exposures, fire sales, and market-based sentiment, while common exposures result from portfolio overlaps. We apply this model to granular balance sheet and interbank exposure data of the Canadian banking market. First, we document that contagion varies over time, with the highest levels around the Great Financial Crisis (GFC) in 2008 and somewhat lower levels for the pandemic period. Second, we find that since the introduction of Basel III, the relative importance of risks has changed, hinting that sources of systemic risk have changed structurally. Our new framework complements traditional stress-testing exercises focused on single institutions by providing a holistic view of risk transmission"--Abstract, page ii.
Permanent link to this Catalogue record:
publications.gc.ca/pub?id=9.942545&sl=0
| Department/Agency | Bank of Canada, issuing body. |
|---|---|
| Title | Decomposing systemic risk : the roles of contagion and common exposures / by Grzegorz Hałaj and Ruben Hipp. |
| Series title | Staff working paper = Document de travail du personnel, 1701-9397 ; 2024-19 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | ISSN assigned to different series. "Last updated: May 28, 2024." Includes bibliographical references (pages 30-33). Includes abstracts in English and French. |
| Publishing information | [Ottawa] : Bank of Canada = Banque du Canada, 2024. ©2024 |
| Author / Contributor | Hałaj, Grzegorz, author. |
| Description | 1 online resource (ii pages, 1 unnumbered page, 35 pages) : illustrations (chiefly colour). |
| Catalogue number |
|
| Subject terms | Banks and banking -- Canada -- Econometric models. Interbank market -- Canada -- Econometric models. Risk -- Canada -- Econometric models. Banques -- Canada -- Modèles économétriques. Marché interbancaire -- Canada -- Modèles économétriques. Risque -- Canada -- Modèles économétriques. |
Request alternate formats
To request an alternate format of a publication, complete the Government of Canada Publications email form. Use the form’s “question or comment” field to specify the requested publication.- Date modified: