Interconnectedness and systemic risk : A comparative study based on systemically important regions

Lei FANG, Jiang CHENG, Fang SU*

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

1 Scopus Citations

Abstract

We apply a novel technique to identify systemically important regions (SIRs) in a global network that shows a reduced degree of concentration and the development of a multi-centered structure. We observe that when a region is more connected to other regions, it is exposed to a higher level of systemic risk. This condition holds even more strongly for non-systemically important regions. However, for SIRs, interconnectedness is not significantly associated with systemic risk. Our empirical evidence suggests that an increase in interconnectedness at the regional level, together with a decrease in interconnectedness for a single pivotal center, may reduce the aggregate systemic risk at the global level.

Original languageEnglish
Pages (from-to)147-158
Number of pages12
JournalPacific Basin Finance Journal
Volume54
Early online date22 Feb 2019
DOIs
Publication statusPublished - Apr 2019

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Comparative study
Systemic risk
Empirical evidence
Global network

Keywords

  • Interconnectedness
  • Networks
  • Systemic risk
  • Systemically important regions

Cite this

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abstract = "We apply a novel technique to identify systemically important regions (SIRs) in a global network that shows a reduced degree of concentration and the development of a multi-centered structure. We observe that when a region is more connected to other regions, it is exposed to a higher level of systemic risk. This condition holds even more strongly for non-systemically important regions. However, for SIRs, interconnectedness is not significantly associated with systemic risk. Our empirical evidence suggests that an increase in interconnectedness at the regional level, together with a decrease in interconnectedness for a single pivotal center, may reduce the aggregate systemic risk at the global level.",
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Interconnectedness and systemic risk : A comparative study based on systemically important regions. / FANG, Lei; CHENG, Jiang; SU, Fang.

In: Pacific Basin Finance Journal, Vol. 54, 04.2019, p. 147-158.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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T1 - Interconnectedness and systemic risk : A comparative study based on systemically important regions

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AU - SU, Fang

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AB - We apply a novel technique to identify systemically important regions (SIRs) in a global network that shows a reduced degree of concentration and the development of a multi-centered structure. We observe that when a region is more connected to other regions, it is exposed to a higher level of systemic risk. This condition holds even more strongly for non-systemically important regions. However, for SIRs, interconnectedness is not significantly associated with systemic risk. Our empirical evidence suggests that an increase in interconnectedness at the regional level, together with a decrease in interconnectedness for a single pivotal center, may reduce the aggregate systemic risk at the global level.

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KW - Networks

KW - Systemic risk

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