The global financial crisis has reignited interest in models of crisis prediction. It has also raised the question whether financial connectedness-a possible source of systemic riskcan serve as an early warning indicator of crises. In this paper we examine the ability of connectedness in the global network of financial linkages to predict systemic banking crises. Our results indicate that increases in a country's financial interconnectedness and decreases in its neighbors' connectedness are associated with a higher probability of banking crises after controlling for macroeconomic fundamentals.

Given a social network, can we quickly 'zoom-out' of the graph? Is there a smaller equivalent representation of the graph that preserves its propagation characteristics? Can we group nodes together based on their influence properties? These are important problems with applications to influence analysis, epidemiology and viral marketing applications.In this paper, we first formulate a novel Graph Coarsening Problem to find a succinct representation of any graph while preserving key characteristics for diffusion processes on that graph. We then provide a fast and effective near-linear-time (in nodes and edges) algorithm coarseNet for the same. Using extensive experiments on multiple real datasets, we demonstrate the quality and scalability of coarseNet, enabling us to reduce the graph by 90% in some cases without much loss of information. Finally we also show how our method can help in diverse applications like influence maximization and detecting patterns of propagation at the level of automatically created groups on real cascade data.

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The global financial crisis has reignited interest in models of crisis prediction. It has also raised the question whether financial interconnectedness-a possible source of systemic risk-can serve as an early warning indicator of crises. In this paper, we examine the ability of connectedness in the global network of financial linkages to predict systemic banking crises during the 1978-2010 period. Our results indicate that increases in a country's own connectedness and decreases in its neighbours' connectedness are associated with a higher probability of banking crises after controlling for macroeconomic fundamentals. Our findings suggest that financial interconnectedness has early warning potential, especially for the 2007-2010 wave of systemic banking crises.

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