Abstract
Financial stability relates to a financial system that is impervious to systemic shocks, accelerates effective financial intermediation and mitigates macroeconomic losses while ensuring that confidence in the financial system is retained. Following the events of the 2007–2009 global financial crisis, which destabilized financial systems, regulators led by the Basel Committee on Banking Supervision embarked on several policy measures that aimed to improve the resilience of financial institutions and the financial system. In so doing, they investigated the problem of systemic risk. In line with this concern, this thesis focuses on modelling different dimensions of systemic risk in the financial system. The first empirical chapter of this thesis, examines which group contributes the most to systemic risk in South Africa between banks and insurers. The chapter builds on the conditional value at risk (CoVaR) method which is based on quantile regression, which nonetheless, has been proven not to show a monotonic relationship with the dependence parameter. For this reason, the generalized autoregressive score dynamics (GAS) of Creal et al. (2013) are adopted to augment the CoVaR. GAS dynamics use the score of the density as a mechanism to update parameters. Our findings show that in South Africa, insurers contribute more to system wide instability compared to banks...
Ph.D. (Economics)