Systemic risk contagion within US states

Abstract

Purpose

This study aims to examine the systemic risk contagion in banks from 15 US states using extreme shocks in their distance to risk.

Design/methodology/approach

The authors contemplate a model that inputs co-exceedances in the base US states’ banking sector as the dependent variable and the co-exceedances in other states’ banking sector (along with other underlying variables of a banking system) as the explanatory variables.

Findings

The authors find smaller states transmit and receive more systemic shocks than their larger counterparts and larger states exhibit a better shock-resisting capacity than their smaller counterparts. The authors also find that bigger shocks are more contagious than the smaller shocks.

Originality/value

This will be the first paper that will investigate the inner linkage of US states’ banking network using three different distance to risk methods, thus providing timely guidance for regulators.

RAS ID

32611

Document Type

Journal Article

Date of Publication

2021

Funding Information

Edith Cowan University Early Career Research Grant: G1004390.

School

School of Business and Law

Copyright

subscription content

Publisher

Emerald

Comments

Choudhury, T., & Daly, K. (2021). Systemic risk contagion within US states. Studies in Economics and Finance, 38(4), 836-860. https://doi.org/10.1108/SEF-08-2020-0342

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Link to publisher version (DOI)

10.1108/SEF-08-2020-0342