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)

3 Citations (Scopus)

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

Keywords

  • Interconnectedness
  • Networks
  • Systemic risk
  • Systemically important regions

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