Asset Price Bubbles and Systemic Risk
59 Pages Posted: 16 Oct 2017
There are 2 versions of this paper
Asset Price Bubbles and Systemic Risk
Date Written: October 2017
Abstract
This paper empirically analyzes the effects of asset price bubbles on systemic risk. Based on a broad sample of banks from 17 OECD countries between 1987 and 2015, we show that asset price bubbles in stock and real estate markets raise systemic risk at the bank level. The strength of the effect depends strongly on bank characteristics (bank size, loan growth, leverage, and maturity mismatch) as well as bubble characteristics (length and size). These findings suggest that the adverse effects of bubbles can be mitigated substantially by strengthening the resilience of financial institutions.
Keywords: Asset price bubbles, CoVaR, Credit Booms, Financial crises, systemic risk
JEL Classification: E32, G01, G12, G20, G32
Suggested Citation: Suggested Citation