Oil Prices and Systemic Financial Risk : A Complex Network Analysis

The risk arising from drastic changes in oil prices has become an important factor that affects the stability of the financial system. This study uses firm-level data to explore the systemic financial risk contagion from the oil market to the financial markets through a complex network perspective. Our analysis considers the risk amplification effect in financial networks and provides an in-depth empirical study of risk contagion among financial institutions under oil market risk shock. The results of this paper suggest that systemic financial risk rises significantly during oil crisis events. This paper also captures important characteristics of the network, including major risk receivers and risk transmitters, and finds that banks play an important role in transmitting oil market risk. Furthermore, considering the important role of the financial system in the macro economy, the systemic financial risk caused by oil market risk is mainly transmitted to the macroeconomy through consumption and investment demand channels and has long-term negative effects on economic output