A Study of the Spillover Effects of Crises in the Banking System using DCC and BEKK Approaches

Document Type : Original Article

Authors

1 Ph.D. Candidate, Department of Financial Engineering, Faculty of Humanities, Qom Branch, Islamic Azad University, Qom, Iran.

2 Associate Professor, Department of Business Management, Faculty of Management, Tehran Central Branch, Islamic Azad University, Tehran, Iran.

3 Assistant Professor, Department of Accounting, Faculty of Humanities, Qom Branch, Islamic Azad University, Qom, Iran.

Abstract

The issue of Systemic risk, as a macro-level phenomenon that can affect the stability of financial systems has received much attention in recent years. This evident in the fact that the concept of systemic risk has emerged as a synonym for financial vulnerability or fragility. Such risks typically arise from instability in financial institutions and can be transmitted to the entire financial system. The objective of the current study is to identify the factors that cause systemic risk in banking systems. The statistical population of this study is all banks listed on the Tehran Stock Exchange between the years 1390 to the end of 1397. In total, 13 banks active during this period were included in the present study. To determine whether there is a relationship between systemic risk in the Iranian banking sector with the currency market, the global gold market, the global oil market and the stock market, the paper starts with identifying and extracting time series data concerning the factors that cause shocks to the stock value of banks and modeling them through a Vector Auto Regressive model. Subsequently, based on the residuals of the VAR model, a multivariate MGARCH model was calculated. Finally, the domino effect of systemic risk among banks was tested using the significance coefficients of the Vector Auto Regressive model.
Based on the results, the coefficient of the global oil market and gold market return variable is significant, so that shocks to the global oil market and gold market affect the return of these variables by 4 and 13 percent, respectively. Also, the most uncertain conditions in the years under study are related to the stock market, gold market, foreign exchange markets, and global oil market, respectively. So that a shock to the global oil market and stock market increases the systemic risk of banks by 25 and 16 percent.

Keywords

References

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Journal of Defense Economics and Sustainable Development
Volume 7, Issue 23
June 2022
Pages 81-100

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