Contagion of the Global Financial Crisis and the Systemic Risk in the Banking System: Bivariate EVT Analysis in 6 Emerging Asia Economies
This thesis aims to study the contagion and systemic risk of the Global Financial Crisis by analyzing tail dependence between market stock returns and bank stock returns between US, Europe and selected emerging Asian economies (Indonesia, Malaysia, Thailand, Philippines, Singapore, and South Korea). We apply the concept of bivariate Extreme Value Theory to model the dependence between two returns series for each variable under examination. We find dependencies between pairs of markets that are influenced by their size, especially for large markets in emerging Asian countries that tend to have a higher dependency to the market in the more advanced country such as the U.S. and some countries in Europe. The results also suggest that the dependencies between market returns and bank stock returns in the same region tend to be higher than dependencies between these returns across two different regions. We also find that larger institution has more dependencies with the market stock, suggesting that larger-size bank can cause disruption in the market. Further, the higher probability of extreme loss can be seen during the crisis period, which is shown by the non-linear dependency between the pre-crisis and the post-crisis period. Finally, our analysis suggests that systemic risk appears in the domestic banking systems in emerging Asia, as shown by the extreme dependencies within banks in the system. Overall, our results provide caution to policy makers and investors alike on the possible contagion of the impact of global financial crisis across different markets.
|Keywords||Global Financial Crisis, Extreme Value Theory, contagion, systemic risk.|
|Thesis Advisor||Vries, C.G. de|
Kuswardani, Ratna Khairunnisa. (2018, April 5). Contagion of the Global Financial Crisis and the Systemic Risk in the Banking System: Bivariate EVT Analysis in 6 Emerging Asia Economies. Economics. Retrieved from http://hdl.handle.net/2105/41974