Financial bridges and network communities

Roberto Casarin, Michele Costola and Erdem Yenerdag

No 208, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We analyze the global financial crisis and the European sovereign debt crisis showing that the European network exhibits a strong community structure with two main blocks acting as shock spreader and receiver, respectively. We provide evidence of the prominent role played by insurances in the spread of systemic risk in both crises and demonstrate that institutions with a large number of inter-community linkages (community bridges) are more relevant in spreading contagion than institutions with large centrality. Network measures based on the community structure can provide a better description of the financial connectedness and effective early warning indicators for financial losses.

Keywords: Systemic Risk; Financial Institutions; Network Communities; Financial Crises (search for similar items in EconPapers)
JEL-codes: C51 G12 G29 (search for similar items in EconPapers)
Date: 2018, Revised 2018
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:208

DOI: 10.2139/ssrn.3178053

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