skip to content

Faculty of Economics

Journal Cover

Geraci, M. V. and Gnabo, J-Y.

Measuring Interconnectedness between Financial Institutions with Bayesian Time-Varying Vector Autoregressions

Journal of Financial and Quantitative Analysis

Abstract: We propose a market-based framework that exploits time-varying parameter vector autoregressions to estimate the dynamic network of financial spillover effects. We apply it to financials in the Standard & Poor’s 500 index and estimate interconnectedness at the sectoral and institutional levels. At the sectoral level, we uncover two main events in terms of interconnectedness: the Long-Term Capital Management crisis and the 2008 financial crisis. After these crisis events, we find a gradual decrease in interconnectedness, not observable using the classical rolling-window approach. At the institutional level, our framework delivers more stable interconnectedness rankings than other comparable market-based measures.

Author links: Marco Valerio Geraci  

Publisher's Link: https://doi.org/10.1017/S0022109018000108



Papers and Publications



Recent Publications


Fruehwirth, J., Iyer, S. and Zhang, A. Religion and Depression in Adolescence Journal of Political Economy, forthcoming [2019]

Onatski, A. and Wang, C. Alternative Asymptotics for Cointegration Tests in Large VARs Econometrica [2018]

Elliott, M. and Golub, B. A network approach to public goods accepted, Journal of Political Economy [2018]