Systemic risk contagion within US states

Choudhury, Tonmoy; Daly, Kevin

doi:10.1108/sef-08-2020-0342

Cited by 11 publications

(4 citation statements)

References 60 publications

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“…They found that high-stress periods such as the COVID-19 pandemic spur an increase in contagion. This finding connects with Choudhury and Daly’s (2021) idea that larger (financial) shocks are more contagious than smaller ones. This finding means that a systemic effect is more likely in this case and with the results from Batten et al (2021).…”

Section: Literature Reviewsupporting

confidence: 85%

On the interdependencies between mortgage, credit card and auto loans delinquency rates: evidence from the US states plus the District of Columbia

Fuinhas

Silva

Duarte

2023

SEF

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Purpose This study aims to explain how delinquency shocks in one type of debt contaminate the others. That is, the authors aim to shed light on the time pattern of delinquencies in different debt types. Design/methodology/approach This study analyzes the interdependencies between mortgage, credit card and auto loans delinquency rates in the USA from 2003 to 2019, using a panel VAR-X, the panel Granger causality tests and the Geweke linear dependence measures. The authors also compute the impulse response functions of a shock to one kind of debt on the others and decompose the variance of the forecast errors. Findings The authors find a statistically significant bidirectional Granger causality between the delinquencies. The Geweke measures of linear dependence and the Dumitrescu and Hurlin Granger non-causality tests support that mortgage predominantly causes credit card and auto loan delinquencies. Auto loans also cause credit card delinquencies. The impulse response functions confirm this pattern. This scenario aligns with a sequence where debtors consider rational first to default on credit cards, second on auto loans and only on mortgages in the last instance. Indeed, credit card delinquencies Granger-cause delinquencies in other debts when it occurs. Originality/value To the best of the authors’ knowledge, this is the first study to focus on the temporal pattern of delinquency rates for all the US states, using panel data. Furthermore, the results call for policymakers to design regulations to break the transmission channel from debt delinquencies.

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Section: Literature Reviewsupporting

confidence: 85%

On the interdependencies between mortgage, credit card and auto loans delinquency rates: evidence from the US states plus the District of Columbia

Fuinhas

Silva

Duarte

2023

SEF

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“…Future researchers may extend this study by considering the calendar effects in Bitcoin’s conditional volatility that significantly affect its return (Kinateder and Papavassiliou, 2021). Another area of interest might be the contagion risk to other developed or even developing countries (Choudhury and Daly, 2021; Choudhury et al , 2021; Daly et al , 2019; Yoon et al , 2021) as the financial risk during COVID-19 in the Australian stock markets may trigger spillover effects.…”

Section: Discussionmentioning

confidence: 99%

Is Bitcoin a safe haven? Application of FinTech to safeguard Australian stock markets

Kamran

Butt

Abdel-Razzaq

et al. 2021

SEF

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Purpose This study aims to address the timely question of whether Bitcoin exhibited a safe haven property against the major Australian stock indices during the first and second waves of the COVID-19 pandemic in Australia and whether such property is similar or different in one year time from the first wave of the COVID-19. Design/methodology/approach The authors used the bivariate Dynamic Conditional Correlation, Generalized Autoregressive Conditional Heteroskedasticity model, on the five-day returns of Bitcoin and Australian stock indices for the sample period between 23 April, 2011 and 19 April, 2021. Findings The results show that Bitcoin offered weak safe haven and hedging benefits when combined in a portfolio with S&P/ASX 200 Financials index, S&P/ASX 200 Banks index or S&P/ASX 300 Banks index. In regard to the S&P/ASX All Ordinaries Gold index, the authors found Bitcoin a risky candidate with inconsistent safe haven and hedging benefits. Against S&P/ASX 50 index, S&P/ASX 200 index and S&P/ASX 300 index, Bitcoin was nothing more than a diversifier. The outset of the second COVID-19 wave, which was comparatively more severe than the first, is also reflected in the results with considerably higher correlations. Originality/value There is a lack of in-depth empirical evidence on the safe haven capabilities of Bitcoins for various Australian stock indices during the first and second waves of the COVID-19 pandemic. The study bridges this void in research.

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“…A strong and resilient banking system is the foundation for sustainable economic growth, as banks are the hubs for credit intermediation and a well-acknowledged connection for service activities [51]. The results presented in this study suggest that the banking system is exposed to significant domestic contagion risks arising from systemic defaults supported by other authors in the field [52]. This is because the Chinese markets provide weak signals of forthcoming stress in banking systems.…”

Section: Discussionmentioning

confidence: 57%

Non-Traditional Systemic Risk Contagion within the Chinese Banking Industry

et al. 2021

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Systemic risk contagion is a key issue in the banking sector in maintaining financial system stability. This study is among the first few to use three different distance-to-risk measures to empirically assess the domestic interbank linkages and systemic contagion risk of the Chinese banking industry, by using bivariate dynamic conditional correlation GARCH model on data collected from eight prominent Chinese banks for the period 2006–2018. The results show a relatively high correlation among almost all the banks, suggesting an interconnectedness among the banks. We found evidence that the banking system is exposed to significant domestic contagion risks arising from systemic defaults. Given that Chinese markets deliver weak signals of forthcoming stress in banking sectors, new policy intervention is crucial to resolve the hidden stress in the system. The results have important policy implications and will provide scholars and policymakers further insight into the risk contagion originating from interbank networks.

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Systemic risk contagion within US states

Cited by 11 publications

References 60 publications

On the interdependencies between mortgage, credit card and auto loans delinquency rates: evidence from the US states plus the District of Columbia

On the interdependencies between mortgage, credit card and auto loans delinquency rates: evidence from the US states plus the District of Columbia

Is Bitcoin a safe haven? Application of FinTech to safeguard Australian stock markets

Non-Traditional Systemic Risk Contagion within the Chinese Banking Industry

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