Network-based estimation of systematic and idiosyncratic contagion: The case of Chinese financial institutions

To distinguish systematic and idiosyncratic contagion during financial crises has attracted increasing attention because it can shed light on the potential drivers of contagion. However, the existing methods for distinguishing the two types of contagion cannot work with a large number of institutions. Therefore, this paper innovatively proposes a network-based framework which is able to distinguish the two types of contagion among numerous institutions. By applying the framework to the publicly listed Chinese financial institutions, we've figured out the main drivers of contagion during three financial crises, beneficial for understanding financial stability in China better.