Abstract
We propose a market-based framework that exploits time-varying parameter vector autoregressions to estimate the dynamic network of financial spillovers. We apply it to financials listed in the Standard & Poor's 500 index and uncover interesting features at the individual, sectorial and system wide level. This includes a gradual decrease in interconnectedness after the crisis, not observable using the classical rolling window approach, and more stable interconnectedness-based rankings that can be used for monitoring purposes.
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