Title: Measuring interconnectedness between financial institutions with Bayesian time-varying vector autoregressions
Authors: Jean-Yves Gnabo - University of Namur (Belgium)
Marco Valerio Geraci - Universite libre de Bruxelles (Belgium) [presenting]
Abstract: A market-based framework is proposed that exploits time-varying parameter vector autoregressions to estimate the dynamic network of financial spillovers. We apply it to financials listed in the Standard \& Poor's 500 index and uncover interesting features at the individual, sectorial and system wide level. This includes a gradual decrease in interconnectedness after the crisis, not observable using the classical rolling window approach, and more stable interconnectedness-based rankings that can be used for monitoring purposes.