Cross-Border Lending Network And Systemic Risk Across Global Stock Markets

Systemic risk is still an important issue that plagues the global economy and financial security.The emergence of the European debt crisis makes it more urgent to study the risk spillover of global stock markets from cross-border lending.This paper constructs a cross-border lending network from the perspective of complex network,uses the generalized impulse response function of VAR to estimate the risk spillover network,and analyzes the impact of cross-border lending relationships on the risk spillover relationships in the global stock market:s from three aspects.This paper first uses the two-dimensional panel analysis to analyze the relationship between network structure and systemic risk,I find that systemic risk of cross-border lending network can propagate to risk spillover network of global stock markets.Diversification of cross-border lending network is not only has an impact on the systemic risk of the same network and also affects risk spillover network of global stock markets.When considering the impact of big shocks and small shocks,I find that the risk spillover network of global stock markets is more stable as long as the cross-border lending network becomes more diversified if the negative shock is small enough,and the risk spillover network of global stock markets is more fragile as long as the cross-border lending network becomes more diversified if the negative shock is big enough.Secondly,I study the impact of cross-border lending relationships between two countries on the relationships of risk spillover in the global stock markets by three-dimensional panel analysis,and find that the higher the ratio of total cross-border lending amount to the nominal GDP of the countries whose debt is being held,the impact of risk spillover on the countries which holds that debt will be higher.Finally,The result of exponential random graph model(ERGlM)confirms that the connections in cross-border lending network also have a positive and significant effect on the likelihood of spillover effect relations in global stock markets.With the deepening of financial openness,China has also strengthened the risk spillover of stock market to other countries and regions through cross-border lending channels.Therefore,China should persist in expanding financial openness,promoting the introduction of foreign capital,and increasing the influence of the Chinese stock market in the world.