Regional Financial Interlinkages and Financial Contagion within Europe
IMF Working Papers, January 1, 2009
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- Regional Financial Interlinkages and Financial Contagion within Europe
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Bibliographic details
- Authors: Inci Ötker, Karl Driessen, Zsofia Arvai
- Published: January 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451871531.001
Summary
- Focus: financial interlinkages within Europe and potential contagion channeled through these interlinkages.
- Topics discussed:
- increased role of external financing as a source of funding for credit growth;
- analysis of potential channels of contagion through financial linkages;
- assessment of the magnitude of cross-border exposures between emerging and western European countries.
- Contribution: provides simple indices of exposure to regional contagion based on stylized facts to help identify likely pressure points and capture potential spillover effects and propagation channels of a regional shock originating from a given country.
Key findings and observations
- The paper documents an increased role of external financing in funding credit growth (statement preserved as in source).
- Cross-border exposures between emerging and western European countries are assessed to gauge potential contagion channels.
- Stylized facts on exposures are used to construct simple indices of exposure to regional contagion.
Methodology and analytical approach
- Uses stylized facts on cross-border exposures to derive simple indices of exposure to regional contagion.
- Aims to identify likely pressure points and capture potential spillover effects and propagation channels of a regional shock originating from a given country.
Policy implications and relevance
- Indices of exposure can help policymakers and analysts identify vulnerable linkages and potential contagion channels within Europe.
- Emphasis on understanding external financing as a funding source for credit growth to anticipate and mitigate contagion risks.