Systemic risk in the US: Interconnectedness as a circuit breaker

Mardi Dungey, Matteo Luciani, David Veredas

    Research output: Contribution to journalArticle

    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.
    Original languageEnglish
    Pages (from-to)305-315pp
    JournalEconomic Modelling
    Volume71
    DOIs
    Publication statusPublished - 2018

    Fingerprint Dive into the research topics of 'Systemic risk in the US: Interconnectedness as a circuit breaker'. Together they form a unique fingerprint.

    Cite this