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Systemic risk in the US: interconnectedness as a circuit breaker

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Dungey, M ORCID: 0000-0003-0074-2314, Luciana, M and Veredas, D 2017 , 'Systemic risk in the US: interconnectedness as a circuit breaker' , Economic Modelling, vol. 71 , pp. 305-315 , doi: 10.1016/j.econmod.2017.10.004.

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Abstract

We measure systemic risk via the interconnections between the risks facing both financial and real economy firms. SIFIs are ranked by building on the Google PageRank algorithm for finding closest connections. For a panel of over 500 US firms over 2003–2011 we find evidence that intervention programs (such as TARP) act as circuit breakers in crisis propagation. The curve formed by the plot of firm average systemic risk against its variability clearly separates financial firms into three groups: (i) the consistently systemically risky (ii) those displaying the potential to become risky and (iii) those of little concern for macro-prudential regulators.

Item Type: Article
Authors/Creators:Dungey, M and Luciana, M and Veredas, D
Keywords: historical decomposition, DY spillover, Granger causality, networks
Journal or Publication Title: Economic Modelling
Publisher: Elsevier Science Bv
ISSN: 0264-9993
DOI / ID Number: 10.1016/j.econmod.2017.10.004
Copyright Information:

Copyright 2017 the Authors. Licensed under Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) https://creativecommons.org/licenses/by-nc-nd/4.0/

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