Research Interests

Applied Econometrics:  Spatial and Network econometrics
Financial Economics: International finance – Financial Network


Measuring sovereign risk spillovers and assessing the role of transmission channels: A spatial econometrics approach With Nicolas Debarsy, Cem Ertur and Jean-Yves Gnabo, Journal of Economic Dynamics and Control, Volume 87 (February 2018), 21-45

Abstract: We contribute to the literature on international risk spillovers by developing a unified framework based on spatial econometrics that enables us to address the following questions: (i) what are the effective transmission channels – real linkages and informational channels – of international risk spillovers across countries and/or regions, (ii) what are the most dominant ones, and (iii) which countries are most at risk for their environment and which are suffering the most from international exposure. Our analysis, based on 41 advanced and emerging economies from 2008Q1 to 2012Q4, shows that among the considered channels for explaining international spillovers of sovereign bond spreads, the informational channel is of utmost importance. Our results challenge previous findings from the literature in which the empirical strategy did not accommodate altogether important features of country spillovers, such as the co-existence of multiple transmission channels in the presence of contemporaneous and time-lagged interactions. Ultimately, our stress-testing analysis reveals important insights on countries prone either to international spillovers, international exposure or both at the regional and the worldwide level.

Working papers and work in progress

All papers can be made available upon request.

  • Sovereign risk spillovers through endogenous cross-border financial linkages: an empirical analysis (Job market paper)

Abstract: Recent turmoil in advanced sovereign debt markets raised awareness about the vulnerabilities of sovereigns vis-à-vis the financial system. This paper analyzes the role of cross-border financial linkages for the transmission of sovereign risk across advanced economies. Such an analysis implies taking into consideration the potential endogeneity issue that could lead to biased estimates. To that end, I use an instrumental variable approach which combines two existing frameworks, namely the spatial econometric and capital flow modeling. Considering a sample of 15 OECD countries from 2006 to 2014, the results show that, contemporaneously, banks’ lending activities between countries have a significant effect on domestic sovereign risk. The simulations indicate that an idiosyncratic shock in Portugal, Ireland, Italy, Greece, and Spain has a significant indirect impact on core European countries. The most affected are Germany and France whereas the main risk transmitters are Spain, Italy, and Ireland to a lesser extent.

  • Contagion in large US banking institutions: a robust analysis (with S. Béreau, N. Debarsy, J.-Y. Gnabo)

Abstract: What drives financial contagion? We argue that the empirical literature aimed at documenting the channels of contagion suffers from a major flaw: it does not properly deal with potential endogeneity resulting from the response of the transmission channel to a distress of a financial institution. We propose to tackle this issue by using a novel spatial econometric estimation procedure based on a control function approach and offer « robust-to-endogeneity » evidence on the role of indirect financial contagion channels in the banking industry. Our estimations are based on a total of 28 large US banks over the period 2005Q1-2013Q4 period and confirm that several channels are endogeneous. Among all considered channels, similarity in portfolio investments in the financial sector appears as particularly important. Equipped with this information, we build a pre-crisis interconnectedness indicator that we call « Spatially Based Centrality » or SBC and show that it helps forecasting vulnerable institutions in times of crisis.

Abstract: Beyond the general issue of institutional change at the aggregate level, some studies have shown that the diversity of Japanese firms has increased since the late 1990s, both in terms of performance and organization. This paper contributes to this literature by investigating the evolving employment practices at the firm level. In mobilizing a database of listed manufacturing firms, we focus on the evolution of the speed of downsizing between the 1990s and the 2000s. A specificity of our paper is that we do not limit our analysis to the introduction of individual effects but we rather resort to a Bayesian estimation procedure, which yields to (firm-specific) individual forecasts of the parameters of the adjustment process modelled with random coefficients. The first major result we get is a decreasing average speed of downsizing, contrary to what is found in a simple estimation with individual effects. Second, we confirm the increasing heterogeneity of Japanese firms between the 1990s and the 2000s, through a rising dispersion of the speed of downsizing. Third, we are able, from a descriptive viewpoint to identify some characteristics of firms with different speed of downsizing.


Ongoing projects:

  • On modelling interconnectedness in the syndicated loan market (with Bryan Graham)
  • On the impact of interconnectedness on the euro area banks CDS

Research Stays

Spring 2018 : Visiting Student Researcher, University of California at Berkeley, United States
Summer 2017: PhD Trainee, National Bank of Belgium

Conferences and seminars

  • 2018:   12th Method in International Finance Network (MIFN) Workshop, Université catholique de Louvain, Belgium;  67th International Congress of the French Economic Association, Paris School of Economics, France; 17th International Workshop on Spatial Econometrics and Statistics, University of Burgundy, France;  Berkeley Econometric reading group, University of California-Berkeley, United States
  • 2017:  6th PhD Student Conference in International Macroeconomics and Financial Econometrics, University of Paris Ouest-Nanterre, France
  • 2016:  15th workshop on econometrics, University of Paris Ouest – Nanterre; 10th World Conference of the Spatial Econometrics Association, Rome; 15th International workshop on spatial Econometrics and Statistics, Orleans
  • 2015  26th (EC)2 Conference, Heriot-Watt University, United Kingdom; Doctoral seminar in Economics, University of Orleans, France; Doctoral Workshop in Economics, University of Namur, Belgium