Instability spillovers in the banking sector: A spatial econometrics approach |
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| Institution: | 1. Department of Statistical and Mathematical Methods in Economics, University of Economics in Katowice, 1-go Maja St 50, 40-287 Katowice, Poland;2. Department of Insurance and Capital Markets, Faculty of Management, University of Warsaw, Szturmowa St 1/3, 02-678 Warsaw, Poland;1. College of Business Administration, Hunan University, Changsha 410082, China;2. College of Finance and Statistics, Hunan University, Changsha 410079, China;3. Business School, Ningbo University, Ningbo 315211, China;1. Seoul National University Business School, 1 Gwanak Ro, Gwanak Gu, Seoul 08826, Korea;2. Department of Statistics and Actuarial Science, Soongsil University, 369 Sangdo-Ro, Dongjak-Gu, Seoul 06978, Korea;1. Department of Business Administration, National Chin-Yi University of Technology, No. 57, Sec. 2, Zhongshan Rd., Taiping Dist., Taichung 41170, Taiwan;2. Department of Business Administration, Fu Jen Catholic University, No. 510, Zhongzheng Rd., Xinzhuang Dist., New Taipei City 242062, Taiwan;3. Department of Money and Banking, National Chengchi University, No. 64, Sec. 2, Zhinan Rd., Taipei 11605, Taiwan;1. School of Finance, Nanjing Agricultural University, Nanjing, China;2. School of Economics and Management, Southeast University, Nanjing, China;1. Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, 100101, PR China;2. Key Laboratory of Land Surface Pattern and Simulation, Chinese Academy of Sciences, Beijing, 100101, PR China;3. University of Chinese Academy of Sciences, Beijing, 100149, PR China;4. School of Soil and Water Conservation, Beijing Forestry University, Beijing, 100083, China |
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| Abstract: | In the study, we employ a dynamic spatial panel model to identify factors that are the sources of instability spillover in the banking sector. Using a sample of publicly listed banks, we document that the stability of a bank depends not only on its own characteristics and the macroeconomic conditions of its home country, but also on the stability of other banks in the same and other countries. We find weak evidence that the spillover effects are greater from domestic banks than from foreign ones. This study has significant implications for market regulators in terms of the role of country interdependence as a spillover mechanism during times of financial turbulence. |
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| Keywords: | Banking Spillover effect Spatial econometrics Cross-sectional dependence |
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