Dear Colleagues,

Financial stability as well as systemic risk, which can have catastrophic ramifications for the operation of the financial system, has become a major concern for central banks and policymakers. The transmission of high volatility across global financial markets following the September 11, 2001 attacks and the Global Financial Crisis (GFC) of 2007–2009 has shown that traditional risk models are inadequate for measuring the spillover effects of major shocks in financial markets. Moreover, traditional risk models failed to account for the growing complexity of financial products, and the impact of financial information flows, and to explain the differences in the endogenous behavior of different investors in the financial system. As a result, a consensus emerged that regulatory authorities should make identifying and measuring systemic risk a top priority.

According to the United Nations (UN), systemic risks can impede efforts toward reducing poverty and development. Financial crises have frequently shown that events in one economy may spill over to other economies that may have negative consequences for the business environment, employment, and economic growth, as well as social and environmental systems. Financial instability leads to rises in crime, poverty, and inequality globally. Therefore, monitoring and controlling systemic risk is not only very important for a healthy financial system but also important for the business environment, employment, poverty, and income inequality as well as sustainable economic development.

As the global financial crisis heightened the specter of institutions' financial collapse due to the so-called systemic risk, assessing systemic risk in the financial system has become critical following the global financial crisis.  Although there is no consensus on the definition of systemic risk in the literature, it is related to three important aspects of financial markets: interconnectedness, spillovers, and the source of the shock that compromises the integrity of the financial system. After the GFC, the attention toward large financial institutions has significantly increased and the paradigm of “too big to fail” has come to the fore because large financial institutions tend to exploit their position in the financial system to their advantage in times of crisis, a well-known moral hazard problem. These large financial institutions are also called “systemically important financial institutions – SIFIs” in the literature. The SIFIs are critical in that their failure would disrupt financial activities and, should they fail, the cost to the economy would be potentially very high.

The aim of the Special Issue is to examine the impact of systemic risk on financial stability and sustainable economic growth. This is related to the United Nations Sustainable Development Goal 10 because issues related to systemic risk can potentially have an impact on inequality. Recall that UN Sustainable Development Goal 10.5 is to: "Improve the regulation and monitoring of global financial markets and institutions and strengthen the implementation of such regulations."  It is well known that financial instability can have adverse effects on economic inequality both in emerging and developed countries. In this context, high-quality papers that focus on systemic risk and financial stability are welcome for the Special Issue. It is expected that empirical results in the Special Issue are crucial for the policy-makers and regulators.

In this Special Issue, original research articles and reviews are welcome. Research areas may include (but are not limited to) the following:

• Critical issues in the measurement, modeling, and management of systemic risk;
• Systemic risk in financial, banking, and insurance sectors;
• Do economic factors lead to shifts in financial connectedness? Country-level, regional, and global evidence;
• The effect of global factors (GFC, European debt crisis, oil crisis, COVID-19, the Russia–Ukraine conflicts, etc.,) on the connectedness of financial markets;
• Examining probable causes or increases in systemic risk that could have an adverse effect on the economy of developing and developed economies;
• Potential ramifications of Brexit and Evergrande on local, regional, and global scales of financial connectedness and systemic risk;
• Static and dynamic connectedness between financial digital assets;
• Static and dynamic connectedness of financial stress across developed and emerging or frontier markets;
• Financial connectedness of developed and emerging or frontier markets impacted by global shocks;
• Return and risk spillovers between financial markets.

We look forward to receiving your contributions.

Prof. Dr. Emrah Ismail Çevik
Prof. Dr. Sel Dibooglu
Dr. Mehmet Fatih Bugan
Guest Editors

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• systemic risk
• financial stability
• economic growth
• sustainability