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Networks of spillover effects to spot systemic risk in the banking industry: testing Granger causality in a high dimensional VAR model

Paccagnella, Emanuele LU (2023) NEKN01 20231
Department of Economics
Abstract
In this essay the evolution of global systemic risk is investigated by creating networks (and communities) of contagion among 88 banks that are deemed systemically important on a global level (particularly western economy). The contagion is defined by a Granger Causality relation between two individuals in the network, this is tested using the Post double selection method described in Margartitella et al. 2021. The method allows to get rid of the High Dimensionality issue arising in testing a VAR(p) model and estimate models over small numbers of time observations. It is found that the method is useful in shaping the evolution of systemic risk in the relevant years and could be used in further application for example creating an index of... (More)
In this essay the evolution of global systemic risk is investigated by creating networks (and communities) of contagion among 88 banks that are deemed systemically important on a global level (particularly western economy). The contagion is defined by a Granger Causality relation between two individuals in the network, this is tested using the Post double selection method described in Margartitella et al. 2021. The method allows to get rid of the High Dimensionality issue arising in testing a VAR(p) model and estimate models over small numbers of time observations. It is found that the method is useful in shaping the evolution of systemic risk in the relevant years and could be used in further application for example creating an index of global systemic risk. (Less)
Please use this url to cite or link to this publication:
author
Paccagnella, Emanuele LU
supervisor
organization
course
NEKN01 20231
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Systemic risk - Network - Contagion - Banks - VAR
language
English
id
9119064
date added to LUP
2023-09-12 15:37:34
date last changed
2023-09-12 15:37:34
@misc{9119064,
  abstract     = {{In this essay the evolution of global systemic risk is investigated by creating networks (and communities) of contagion among 88 banks that are deemed systemically important on a global level (particularly western economy). The contagion is defined by a Granger Causality relation between two individuals in the network, this is tested using the Post double selection method described in Margartitella et al. 2021. The method allows to get rid of the High Dimensionality issue arising in testing a VAR(p) model and estimate models over small numbers of time observations. It is found that the method is useful in shaping the evolution of systemic risk in the relevant years and could be used in further application for example creating an index of global systemic risk.}},
  author       = {{Paccagnella, Emanuele}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Networks of spillover effects to spot systemic risk in the banking industry: testing Granger causality in a high dimensional VAR model}},
  year         = {{2023}},
}