Global Banking Network and Regional Financial Contagion | Asian Development Bank

Global Banking Network and Regional Financial Contagion

Publication | May 2018
Global Banking Network and Regional Financial Contagion

This paper looks at how the network of cross-border banking appears to play an important role in financial contagion and how shocks are transmitted across borders.

This paper investigates and tests the role of regional exposures in financial contagion from advanced to emerging market economies through the global banking network using data on cross-border bilateral bank claims and liability positions. Results indicate that direct exposures of a country’s own and the overall region’s banking sectors to crisis-affected countries are systematically related to bank capital outflows during the global financial crisis. A further analysis suggests more favorable behavior of the same region lender toward emerging economies during crisis.

Contents 

  • Introduction
  • Bilateral Bank Claims Data and Their Regional Decomposition
  • Regional Contagion of Vulnerabilities
  • Empirical Findings
  • Conclusion
  • Appendix